Arbitration Agreements with Employees

Mandatory arbitration agreements with employees can protect dental practices from costly litigation. Nardone Limited recommends that our dental practice clients consider requiring their employees to sign an agreement requiring arbitration, instead of litigation, as a means to resolving any employment issue. This article explains the benefits of arbitration agreements, how to ensure the agreement will be enforced, and how to implement arbitration agreements in your dental practice.

Why should I consider an arbitration agreement with my dental practice’s employees?

An arbitration agreement with your employees can protect your dental practice from costly employment-based litigation. An arbitration agreement will require your employees or former employees, who have a dispute with your dental practice, to resolve the dispute through arbitration, rather than bringing a lawsuit, against your dental practice, in court.  Arbitration makes more sense for all parties involved, because: (i) it is less expensive than defending a lawsuit; (ii) the arbitration process is less formal and less time-consuming than litigation; and (iii) arbitration usually resolves disputes much quicker than going to court.

 How do I ensure my arbitration agreement is enforceable?

An arbitration agreement is only beneficial to your dental practice if a court will enforce it.  Arbitration agreements are most commonly challenged for: (i) lacking adequate consideration; (ii) being an unconscionable agreement; (iii) failing to obtain a knowing and voluntary waiver of the employee’s right to pursue a claim in court; and (iv) containing a cost-splitting provisions that deter employees from arbitrating claims. Therefore, your arbitration agreement must take these items into consideration and properly address these items for the agreement to be enforceable.

How do I implement an arbitration agreement?

To implement arbitration agreements with your employees, you should first meet with an employment attorney to draft the agreement.  Your attorney will consider the issues for which arbitration agreements are most commonly challenged, as discussed above, and other issues or circumstances related to the drafting of a sound arbitration agreement that fits the individual needs of your dental practice.  After the arbitration agreement is drafted and finalized, it should be included in your employment offers, employment agreements, and your practice’s employee handbook. You should have new employees sign an arbitration agreement when they begin working for your practice. You may give existing employees the agreement to review and sign as well, at any point during their existing employment.  However, although continued employment for an at-will employee can be adequate consideration when an existing employee signs the agreement, it would be more prudent to have your existing employee sign the agreement when they are receiving a raise, bonus, or promotion.  Also, be sure to give employees adequate time to review the agreement and raise any questions they may have before they sign the agreement.  If necessary, it may also be a good idea to have the attorney who drafted the arbitration agreement present and explain the agreement to your employees.  This would ensure all employee questions are properly addressed and answered accurately.  

In sum, arbitration agreements represent one strategy to minimize potential liability as it relates to your employees.  Before implementing an arbitration agreement, there are other strategies you might consider using to resolve controversial employment-related issues, such as mediation.  If you have questions regarding the arbitration agreements, mediation or other strategies, please let us know.