The short answer is Arbitration Agreements can be good, or they can come back to bite you.

Arbitration Agreement is not meant to be used as a tool for employers to take advantage of their employees.

The purpose of such an agreement should be to minimize the exposure for both the employer and the employee.  If the agreement is fair, the employer does not have to worry about the cost of court, and the employee can still have a place to go in the event of a wrongful termination or some other type of claim.

  • Many employers are taking Arbitration Agreements for granted and not taking the time to make sure that they are equitable for both the employee and the employer.
  • Many companies are also thinking that if they put the agreement in the company’s employee handbook that they have done their due diligence when it comes to the employees’ acknowledgment of the agreement because the employee signed the employee handbook acknowledgment. No employer should depend on the acknowledgment receipt that the employee signed for the employee handbook to stand up in court as equal to the Arbitration Agreement being signed as a separate document.

When writing such a contract, the employer needs to make sure of the following

  • The bargaining must be procedurally conscionable by making the parties bargaining power equal.
  • And the employer needs to ensure that the arbitrator will come at a reasonable cost for both sides.

Our advice to employers who want this type of agreement is to make sure that you have this document as a stand-alone, it should not be included in your employee handbook.

We would also encourage employers to review their contract once a year to make sure that it still complies with the necessary labor laws and legal trends.

If employers do not do their research or try to take advantage of their employees, they may find their agreement being thrown out of court.