Employee Arbitration Clauses

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What’s an Employee Arbitration Clause?

Some work arrangements are governed by an employment contract between the employer and employee, which may state important terms regarding the employment.  In some cases, the employee is requested that all employment-related conflicts be resolved through arbitration rather than a formal lawsuit.  Such an agreement is referred to as an arbitration clause or arbitration agreement, and may be included as a standard part of the employment contract.

Arbitration is basically a means of settling legal disputes without going through the entire lawsuit process. In arbitration, an arbitrator is hired, who acts as a neutral third-party mediator between the disputing parties.  The arbitrator helps the parties work out their differences through negotiation rather than confrontational argument as in a lawsuit. 

Are Employee Arbitration Clauses Enforceable Under Law?

Arbitration may be favorable in some situations, but an employee or prospective employee should think twice before signing an arbitration agreement.  When such a clause is signed, the employee is basically signing away their right to file a lawsuit should any legal dispute arise in connection with their work or employer. In addition, arbitration often follows rules different than those of a court of law. For example, some arbitrations may be decided on the basis of a religion rather than secular law. Obviously, this is a major decision that should be weighed carefully before signing the contract.

Arbitration clauses are usually enforceable under state and federal laws.  Arbitration clauses are governed by the Federal Arbitration Act (FAA).   The Act considers arbitration clauses to be enforceable so long as they meet various requirements, such as being in writing and fair or equal for both parties.  However, the FAA doesn’t apply to all industries, such as those involving employees working in the transportation industry.

What if an Employment Arbitration Clause is Violated?

The most common way that an employment arbitration clause is violated is when the employee tries to file a lawsuit in court even if they have already signed an arbitration clause.  In such cases, the case may be thrown out by the judge. 

However, it may be possible to appeal such decisions if there is a good reason to do so.  One reason is if the original arbitration clause was actually invalid due to fraud, coercion, or unfairness.  An example of this is where the employer forced the employee to sign an arbitration clause under threat of force or violence.  In such cases, the clause may be found unenforceable, and the employee’s rights to file a lawsuit may still be intact.

Do I Need a Lawyer for Help With an Employment Arbitration Clause?

Employee arbitration clauses are very powerful agreements that can basically do away with the employee’s right to file a lawsuit.  If you are an employee or prospective employee, you may wish to have an employment lawyer review your employment contract before you sign it.  That way, you can ensure that clause is fair and equal. 

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Last Modified: 01-06-2016 11:09 AM PST

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