New Case Gives Warning About Insufficient Arbitration Clauses

business people groupBY: MATTHEW G. BRENNER

October 31, 2014

Arbitration is an alternative dispute resolution method which allows parties to have their case heard and resolved without a court trial.  Many large institutions (such as banks and insurance companies), small business owners, and service providers who use form agreements with their customers and employees insert an arbitration provision in their form documents.  These provisions are enforceable and require a dismissal of a lawsuit brought by any such agreement.  However, care must be taken to ensure that an arbitration provision contains sufficient language to allow enforcement.  In a recent case, a Florida appellate court ruled that an arbitration agreement is not enforceable if the employer does not disclose the arbitration procedures to the employee when the employee signs the agreement.

About the case:

In Spicer v. Tenet Florida Physician Services, LLC, Shelby Ann Spicer signed an employment agreement when hired by her employer. The agreement contained a conflict resolution paragraph which stated that all disputes are subject to a specific employer created process and would go to final and binding arbitration pursuant to that process.  The conflict resolution paragraph also specifically stated that the employee agrees “to submit any such disputes for resolution under that process…”  In addition, the agreement advised the employee to call the Human Resources Department if there were any questions regarding the agreement.  However, the agreement did not attach the process referenced nor did it provide a description of how the employee could gain access to the process at the time of signing. It was a few weeks later that the employer provided the process to the employee.

What does this mean for employers?

The take away from the ruling in Spicer is that careful consideration is required when drafting or selecting arbitration language for a contract.  At minimum, some reference to the Florida Arbitration Code, or the procedures established by a national, state, or local private dispute resolution provider should be included. Alternatively, the arbitration provision should contain a specific outline of a procedure to be used (for example: timing for the arbitration demand and response, number of arbitrators, selection of arbitrators, location, and length of time for the arbitration hearing, whether discovery is allowed and if so what type of discovery and what limits there will be on discovery).  By including such details, one can avoid unnecessary litigation, (and fees associated therewith), over the enforceability of the arbitration provision. Furthermore, if a specific internal policy or process is referenced in an agreement’s arbitration clause, the internal policy should be attached to the document or to a website, handbook, or other means of accessing the procedure so that the other party cannot use the omission to claim ignorance or adhesion and avoid the arbitration requirement. The bottom line is that if a party wishes to have its disputes resolved in arbitration, it should be sure to incorporate language which will allow that dispute to go to arbitration.

For more information, please contact Matthew G. Brenner or anyone from the firm’s Alternative Dispute Resolution Group or from the firm’s Labor & Employment Group.

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