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4 key elements of an enforceable arbitration clause

Consider these expert tips when forming your agreement

Read about a 5th Circuit case in which the court ruled the ability to retroactively amend employee handbooks makes arbitration clauses unenforceable.

Experts offer these tips to employers for creating enforceable arbitration clauses:

  • Separate the arbitration agreement. Trying to maintain the flexibility to change handbook policies through a disclaimer, or by reserving the right to amend, can backfire when a company has provisions that it wants or that benefit it. John Allgood, of counsel at Ford & Harrison, says some employers reference the arbitration agreement in the handbook, but the agreement is in a separate document.
  • Include a severance provision. Allgood says arbitration agreements should include a severance provision that says if any portion of the agreement is unenforceable, only that portion should be stricken from the agreement.
  • Watch out for contradictory clauses. Sometimes problems arise because different people write different sections of an employee handbook. Allgood says someone should carefully read the entire handbook to check for conflicts.
  • Get input from local counsel. Employers must remember that the agreements they use in one state may not be good in all states. “For multistate operations, it is important to make sure that provisions like arbitration agreements are vetted by local counsel,” says Kelly Hart & Hallman Partner Russell Cawyer.

Beverly Caley

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