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Adding an arbitration agreement? Make it retroactive

by on
in Employment Law,Human Resources

Are you considering adding an arbitration agreement to your terms and conditions of employment? If you do, make sure the contract includes a retroactive clause that makes arbitration the remedy for past complaints, too.

If you don’t, you may actually spur litigation as employees rush to file lawsuits over past alleged discriminatory acts that happened recently but before the arbitration agreement went into effect.

Recent case: A group of cellphone service sellers sued their for­­mer employer after being terminated. They alleged unpaid overtime and other wage-and-hour issues.

The employer tried to get the case tossed out because the employees had signed an arbitration agreement that purported to require all employment disputes go to arbitration.

However, the employer ran into a little problem. It seems the contract language was only prospective. It was silent on any dispute that happened before the agreement went into effect.

That, the court concluded, meant the employees were free to proceed with their case in federal court, since they were only pursuing specific alleged FLSA violations that occurred before that date. (New­­banks, et al., v. Cellular Sales of Knoxville, No. 12-2389, 4th Cir., 2013)

Final note: Don’t try drafting your own agreement. And don’t rely on a form agreement—even one from a large arbitration organization. Instead, get expert legal assistance from a lawyer who knows North Carolina contract law.

Arbitration agreements are contracts and must comply with state law to be valid.

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