Employment Agreement to Arbitrate

Many employers prefer handling employment claims through binding arbitration because it’s typically faster and more cost effective. However, there are several requirements that an Employment Agreement to Arbitrate must satisfy before it will be enforced by the court, such as:

1. A statutory prerequisite to compelling arbitration is demonstrating that the parties to an Employment Arbitration Agreement; i.e., both the employer and employee, agreed to submit their claims to arbitration. If the Employment Arbitration Agreement is not drafted and executed correctly, it may not be enforced by the court, and the employee will be allowed to proceed with litigating their claims.
2. An Employment Agreement to Arbitrate will also not be enforced if it’s unconscionable. There are two types of unconscionability, procedural and substantive, both of which must be present before a court will declare an Employment Agreement to Arbitrate unconscionable. Procedural unconscionability focuses on oppression or surprise due to unequal bargaining power. Substantive unconscionability focuses on overly harsh or one-sided results. The more substantively oppressive a contract term, the less evidence of procedural unconscionability is required to determine if a term is unenforceable, and vice versa.
3. It’s also important that an Employment Agreement to Arbitrate was not signed by the employee under duress. If an employee’s assent to an Employment Agreement to Arbitrate is secured by the employer under duress, the Agreement is voidable by the employee.

While severance of unlawful provision(s) is an option that a court may exercise in its discretion, it’s not wise for an employer to rely on this in the hope of correcting a poorly drafted Employment Arbitration Agreement. If it has multiple defects, the court may view it as a systematic effort by the employer to impose an inferior forum on the employee that works to the employer’s advantage. In such a case, a trial court may conclude that the Employment Arbitration Agreement is permeated with an unlawful purpose and is, therefore, unenforceable.

The attorneys at Branfman Mayfield Bustarde Reichenthal, LLP have considerable experience in drafting enforceable Employment Arbitration Agreements and counseling employers on how they should be presented to their employees to avoid these pitfalls. It’s far more cost effective to use Employment Arbitration Agreements that are drafted correctly then to find out after a claim has been lodged by an employee that it is unenforceable due to defects.