Is your arbitration clause broad enough to protect you? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Is your arbitration clause broad enough to protect you?

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If you use an arbitration clause to limit federal lawsuits, now is a good time to review the terms. As an employer in the 11th Circuit, you can require employees to arbitrate just about any employment dispute.

That can be a distinct advantage, especially as more and more attorneys representing employees push for class-action lawsuits. If employees agree to arbitration, it’s far less likely the case will mushroom to include all similarly situated employees.

Recent case: Cecil Sammons sued his employer, Sonic North Cadillac, alleging that the company hadn’t paid him overtime. He asked the federal court for his unpaid wages plus liquidated damages equal to the underpayment—all under the Fair Labor Standards Act (FLSA).

But the employer pulled out the arbitration agreement Sammons and other employees had signed. The agreement said that “any claim … and all disputes … having any relationship or connection whatsoever with my seeking employment with, employment by, or other association” with Sonic North Cadillac would be resolved by binding arbitration.

The federal court where Sammons filed his lawsuit told him the agreement he signed meant even FLSA claims had to go to arbitration. The court then dismissed the case. (Sammons v. Sonic North Cadillac, No. 6:07-CV-277, MD FL, 2007)

Advice: Have counsel review any arbitration agreement before you present it to current employees. Your attorney can make sure the agreement is a binding contract. Keep the arbitration agreement separate from your company handbook—which you do not want to be a binding contract.

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