Agreement to Arbitrate Employment Claims Between Employer and At-Will

In most instances, an employment contract will not state its expiration date. In such a case, the contract may be terminated at any time by either party. If the employment contract does not have a definite duration, it is terminable at will. This is called employment at will. Under the employment at will doctrine, the employer has historically been allowed to terminate the contract at any time for any reason or for no reason. Some State Courts and some State Legislatures have changed this rule by limiting the power of the employer to discharge the employee without cause.

Arbitration agreements are contracts that modify an employee’s rights by limiting the employee’s ability to file suit in state or federal court. In this way, arbitration agreements serve as an effective means of limiting employment-driven liti¬gation. The relatively large number of employment disputes filed in state and federal court has caused many employers, large and small, to consider alternative means for resolution of employment dis¬putes. One such method is for employers to establish their own system of dispute resolution.

If an employer decides to require arbitration, it should keep a couple of points in mind. While placing information regarding a company’s arbitration policy in the employee handbook is a good idea, the employer should also consider having each employee sign a separate arbitra¬tion commitment.