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These rules make arbitration agreements stick

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in HR Management,Human Resources

There’s no point in using arbitration agreements if they’re not enforceable. Make sure yours will hold up in court by following these rules:

  • Create a separate arbitration agreement (and acknowledgment form) independent of your handbook.
  • In clear language at the top of the agreement, state that it is a mandatory arbitration agreement.
  • Include specific acknowledgment language: “I have read and understand this policy.”
  • Omit language stating that costs will be the responsibility of each party.
  • Explain the document to the employee, answer all questions, witness the employee’s signature.

Recent case: Madeline signed an arbitration agreement—separate from the employee handbook—when she started work at Balco Properties.

An HR manager explained the agreement and showed her where to sign.

Later, Madeline was terminated for what Balco alleged was a payroll discrepancy. She sued, and the company immediately filed for arbitration.

The arbitrator sided with the company, ordered restitution and dismissed the employment claims Madeline had made. That’s when she challenged the validity of the arbitration agreement itself.

The court sided with Balco. It said the agreement was valid and enforceable based on all the circumstances. In fact, it commended the company for being upfront. No one hid the agreement, but instead HR went out of its way to explain the contract terms to Madeline. (Sarafin v. Balco Properties, No. A141358, California Court of Appeal, 2015)

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