Raise arbitration early—or else find yourself in court — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Raise arbitration early—or else find yourself in court

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Does your organization have arbitration agreements in place for some employees, but not others? Then make sure you keep careful track of whose cases should go to arbitration and whose should not.

If one of your employees sues in court, you may lose the right to arbitration if you don’t object to the lawsuit quickly.

You also may lose the right to arbitrate if you rebuff an employee’s arbitration request. Courts want to enforce arbitration agreements, but they may ignore the contracts if it looks like the parties are ignoring them, too.

Recent case: James DiCello developed a successful specialty pharmaceutical business, supplying chemotherapy drugs and other expensive medications. He then agreed to sell the business to Chronimed Holdings, while staying on as a contract employee for several years. If the business hit a profit target, DiCello would get an additional payment. The employment agreement included an arbitration clause.

Then Chronimed told DiCello it had missed its goals and he would not get additional money. DiCello said he wanted to arbitrate. Chronimed protested, claiming it had provided everything the contract called for.

DiCello sued to recover the disputed payment in federal court. He also claimed Chronimed had given up its right to arbitration when it rebuffed DiCello’s attempts to enforce the agreement.

The 6th Circuit Court of Appeals ordered the case to arbitration. It said that in this case, Chronimed hadn’t explicitly refused to arbitrate the claim—it had simply told DiCello it had provided everything to which he was entitled. That, the court concluded, was “posturing” on the company’s part, not an all-out refusal to follow the agreement. Had it flat-out refused to consider arbitration, it would have been barred from trying to get the case out of federal court later. (JPD, et al., v. Chronimed, No. 07-4427, 6th Cir., 2008)

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