Arbitration and Beyond: Avoiding Pitfalls in Drafting Dispute Resolution Clauses in Employment Contracts
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Article Extract: You've just helped a mid-sized company, Allwell Corp., to reach a settlement in an action brought by a disgruntled former employee. The CEO turns to you and says, "Even though I still believe that we didn't do anything wrong, I'm glad this lawsuit is over. I can't believe how much money and time we've wasted in defending ourselves. Now, how can we keep this from happening in the future? I've been reading about companies putting arbitration clauses in all kinds of contracts. I want to know whether we can require our employees to arbitrate and maybe even require them to attempt mediation before arbitration rather than sue us." The CEO tells you to report back by the end of the week. You know that labor contracts often include provisions for arbitration and mediation of grievances. Even though Allwell has a non-union shop, can you just find a clause in a labor contract and cut and paste it into the company's personnel policy? Well, no. If you want to be sure that your proposed "dispute resolution clause" is enforceable, you will need to be more careful in your drafting. This article is designed to warn you about some of the pitfalls you can and should avoid in developing dispute resolution clauses. Because the guidance is clearer for arbitration clauses, we will begin there. The article will then discuss drafting pitfalls applicable to clauses that provide for the use of other dispute resolution processes.
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