Arbitration Policies and Employment Agreements – A Tricky Area

imagesMany business owners have been advised by their attorneys at some point in time to include an arbitration clause in their employment agreements or employee handbooks to make sure that any employment disputes are resolved by an arbitrator and not in a court of law.  After all, many attorneys subscribe to the school of thought that arbitration is cheaper and faster than litigation.

Any employers that follow that advice and want to include an arbitration clause, should follow a few simple rules to make sure that the arbitration clause is actually enforceable:

1.  The arbitration clause must be simple and clear.  For example, in Texas Health Resources and Texas Health Presbyterian Hospital Dallas d/b/a Presbyterian Hospital Dallas v. Kruse, an employee of the hospital was able to avoid arbitration by claiming that she did not know that she was required to arbitrate her employment disputes because the employee handbook “encouraged” employees to use an alternative dispute resolution process, but did not state that it was mandatory.

2.  When employment agreements are revised, make sure the arbitration clause remains in effect and covers the necessary areas.  Where a new and an old employment agreement contain different terms, and an old version has an arbitration clause, but the new version does not, the arbitration clause may still apply to those disputes that arise out of the terms contained in the old agreement, if such terms are not addressed in the new one. This is why it is always a good idea to keep all versions of the employment agreements on file and have an attorney review the new version to make sure that the scope of the arbitration policy is clear.

3. Include a “Halliburton Savings Clause” in an employment handbook.  An employment handbook that contains an arbitration policy should state that it can be changed at any time by the employer only after notice is provided to employees. If an employer can change the rules without giving an employee advance notice, then the agreement between the employer and its employees is illusory and will not be enforced by courts.  The arbitration policy should also make clear that the arbitration process or policy will not be changed once an employee has suffered an employment-related injury or initiated an adverse-employment claims.

If you are interested in having your handbook reviewed and/or revised or you are involved in an employment dispute that involves an arbitration clause and need assistance, please contact Leiza Dolghih at Leiza.Dolghih@GodwinLewis.com  or (214) 939-4458.

One Comment on “Arbitration Policies and Employment Agreements – A Tricky Area

  1. Pingback: Houston, We Have a Problem. Where’s That Non-Compete Agreement? | North Texas Legal News

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