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Creating Arbitration Agreements with Your Employees

Mature female lawyer or notary with client in her office for counselingMany employers routinely include mandatory arbitration agreements for resolving employment disputes with their employees. To the surprise of many employers, such clauses are often ruled invalid. To help assure that your agreement requiring arbitration of employment disputes is enforceable, be aware of the following factors:

  1. Consider using a separate, stand-alone agreement. Especially in the context of employer-employee disputes, employers are best served when they can demonstrate that their employees were aware of, and understood, the arbitration agreement at the time it was signed. To best accomplish this, create an arbitration agreement with employees in a stand-alone document that does not contain other topics. This eliminates the situation where the arbitration clause is buried in a long document and helps preclude an employee from arguing that he did not know what he was signing.
  2. Make the agreement mutual. If the agreement with your employees mandates that they submit to arbitration but allows the employer to litigate, it is more vulnerable to challenge as being one-sided.
  3. Employers can also strengthen their mandatory arbitration clause by allowing both sides the opportunity to approve or reject an arbitrator.
  4. Agree to absorb the costs of arbitration.
  5. Comply with state laws and be aware of changes to such laws.

Arbitration has the potential to save employers time and money as compared to traditional civil litigation. Taking these reasonable steps to document that the employee made a voluntary election pursuant to fair terms will go a long way towards assuring that any employment dispute is resolved through arbitration.

For more information about these types of clauses, or to discuss your agreement provisions to see if they are likely to withstand a legal challenge, contact me at (240) 778-2306 or by e-mail at