Many experienced business owners can cite a number of key reasons why it is advantageous to have a pre-dispute arbitration clause, such as cutting down the time and expense of litigation. Additionally, such a clause can prevent negative information from leaking to the press and minimize the potential liability of a company due to greater predictability in arbitration decisions. However, for arbitration to be most effective, it is important to contain an arbitration clause in the beginning of the employment relationship before a dispute arises and so that the employee knows arbitration will be used to decide on any dispute that arises. Some ways to accomplish this goal include:
Review Current Policies
Arbitration clauses should be clear. Ambiguous provisions may not hold up if challenged. The policies should be made prominent in the employment handbook or like material and not buried in the document.
Consider the Scope of the Provision
Arbitration clauses should specifically outline any types of claims that will give rise to the provision. Business owners may wish to consider the types of claims that are common in their industry. Some business owners prefer to list all types of disputes be subjected to arbitration, including the interpretation of any state or federal claim against the employer and any potential class action suits. Legal counsel should be consulted about the clarity of such provisions.
Consider the Employee’s Perspective
Arbitration clauses should not be completely one-sided. It is important to include language that will make the process fair for employees, such as allowing them a say in choosing the arbitrator or agreeing to pay the costs of arbitration. If a court finds that the arbitration process was unconscionable or prevented the employees meaningful access to redress, it may not uphold the agreement.