Should Your Company Consider Arbitration Agreements?

March 12, 2013

No business wants to be sued by an employee or former employee. It is expensive to defend employment lawsuits. In addition, such litigation is time consuming for management and may decrease company morale. There is a means by which employers can minimize employee lawsuits. Your company can require that employees sign arbitration agreements and thus waive their right to file lawsuits in certain situations when they have a dispute with their employers.

However, courts often throw out such agreements on the basis that they are flawed or biased in favor of employers. Employers need to understand the limits of arbitration agreements in order to implement one that will serve to decrease litigation in certain situations, but also stand up in court.

Federal laws, such as the Federal Arbitration Act, and state laws also impact the scope of employment arbitration agreements. Companies need to understand exactly what court rulings and laws impact them and the specific types of agreements they can lawfully institute. Indeed, an arbitration agreement alone does not mean that employers can never be sued over an employment issue. Therefore, employers interested in designing an arbitration agreement should consult with an attorney to ensure that the agreement will not end up being tested as vague, unfair, or overly broad.

This information is general in nature and should not be construed as tax or legal advice.