Should I Include an Arbitration Agreement in My Employment Contracts?

Arbitration is basically a type of ADR or alternative dispute resolution method that you can utilize for avoiding costly and time-consuming litigation in the event that employee-employer grievances or disputes occur. Arbitration is headed by an unbiased third party who’s usually a retired judge or lawyer.

But first, it is important to retain the services of a business lawyer here in Denver, CO for your needs. In arbitration, the judgment or agreement will be legally binding and founded on the presumption that all parties involved agreed to arbitrate whatever issues they agreed upon.

Incorporating an employee arbitration clause or agreement is very common in employment contracts. The main reason for this is that it can save both parties from the potentially costly and damaging litigation process. But is it right for you?

Understanding the Employee Arbitration Clause

The employee arbitration clause or agreement is written into employment contracts. So it is essentially part of the terms and conditions that employees should agree to when they sign your contracts. There are two ways to go about this: forced arbitration or voluntary arbitration.

With a forced arbitration clause, you mandate employees to agree to the arbitration clause or else they can’t work for you. With a voluntary arbitration clause, you give employees the choice to reject or accept the agreement.

If an employee agrees to the arbitration clause, this means that he waives his right to file a lawsuit against you for any cause. This includes wrongful termination, breach of contract, or discrimination, and instead use arbitration for airing out and addressing problems.

judge looking at a document

Crucial Things to Consider Before Putting an Arbitration Clause in Contracts

It’s immensely vital that you understand all the pros and cons, as well as potential implications that come with putting an arbitration agreement in contracts. The following factors are by no means complete, but a good starting point when considering an arbitration agreement:

  • Really think about how forcing arbitration clauses can impact your ability to attract and keep employees and whether or not you’ll be open to negotiating certain aspects of the agreement and why.
  • Keep in mind that even if you find that arbitration will mostly favor your company, you won’t be awarded costs for covering the process if you need it. That being said, you have to figure out where to find an arbitration service or arbitrator that will ensure a fair and neutral outcome should your need to arbitrate.
  • Assess whether or not it will be in the best interest of your company to incorporate restrictions on potential damages or awards through arbitration.
  • Develop a clear process and framework for discovery for grievances and complaints.

It’s also vital to note that aside from weighing the pros and cons and doing your own research, you have to make certain that the terms of your arbitration agreement are 100% legal and fair for all parties involved.

To ensure this, it’s best that you consult a reputable business lawyer in Denver, CO to help you avoid issues later on. Your lawyer will guide you on how to craft a legally binding and reasonable arbitration clause that will fit your specific requirements.

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