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Are All Arbitration Provisions in an Employment Agreement Enforceable?

Whether a particular arbitration clause will be enforceable depends on the way in which the clause is drafted. Generally speaking, if (i) the clause is clear, (ii) arbitration is made mandatory, and (iii) the contract can otherwise be enforced, the arbitration clause will be enforceable.

 

Source

 

Arbitration Provisions

It’s best to start with a brief rundown of what arbitration provisions should include. A basic arbitration clause will be an agreement between the parties to use arbitration instead of the courts in the event of a dispute. The clause should be broad enough to cover all types of disputes and questions of interpretation of the contract. If the clause is not broadly worded, one of the parties could argue that the particular dispute was not within the scope of the arbitration clause.

 

The clause should either specify the following details, or incorporate a set of arbitration rules that provide for such details as:

  • how many arbitrators will be chosen to decide the matter;
  • how an arbitrator is to be chosen (both parties must agree upon someone, and if they are unable to reach a decision within a specified time frame, a mechanism must be in place for the choice of an arbitrator);
  • the rules of the arbitration process (there are many standard sets that can be referenced—for example, see the ADR Institute of Canada’s Arbitration Rules);
  • the seat or location where the arbitration will take place;
  • the language to be used during the arbitration process; and
  • the applicable governing law and jurisdiction.

 

Check out Clausehound.com for sample arbitration clause language!

 

Unenforceable Arbitration Clauses

There are two main reasons why courts have held arbitration clause to be unenforceable – bad drafting and matters of public policy.

Source: Jérome Dessômmes – ÉCRIVAINS CONSULT/Wikipedia

 

Bad drafting

If the arbitration clause creates too many ambiguities, or if arbitration is not clearly mandatory, the  bad drafting of provisions may cause the clause to be unenforceable. There are a few main areas of concern that have been identified by the courts:

  • The arbitration process and procedure should either be written with great detail to avoid the possibility of either party claiming their obligations were unclear, or reference should be made to a recognised set of arbitration rules which themselves contain this detail.
  • To convey obligation and enforceability, mandatory language should be used in the provisions instead of optional language (for example, using “shall” or “must” instead of “may”).
  • Time periods need to be specified (in the contract or in a set of arbitration rules) for when notice of arbitration should be given, how much time is to be given at each step of the arbitration process, and by when the process should be completed and a decision given.

 

Public policy

Sometimes an arbitration clause can run afoul of public policy. This has been especially true in the United States, notably in situations where there is a great inequality of bargaining power between the parties to the contract.

 

One concern expressed by American commentators relates to the cost-effectiveness of arbitration. An examination of case law by Wigdor LLP in New York discussed how arbitration provisions can be invalidated if the costs involved are excessive in a way that “could preclude a litigant from effectively vindicating [his or her] federal statutory rights in the arbitral forum.”

 

Another point of growing concern relates to how arbitration can create, as National magazine puts it, “an alternate system of justice” that more often than not rules in the company’s favor and leaves litigants feeling like they have not rightfully received their day in court.

 

To see standard employment agreements and arbitration provisions, visit our Small Business Law Library!

 

This article was co-authored by Alina Butt.

 

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Check out StartupTech Unleashed’s roadshows in Toronto on February 27th and in Waterloo on February 28th!

Sniffing out awesome startup events, we’re venturing out of the doghouse to check out StartupTech Unleashed’s roadshows in Toronto on February 27th and in Waterloo on February 28th!

 

StartupTech Unleashed’s events offer an intimate environment that will give you a chance see some great startups in all different fields, to learn from other founders, partake in great speaker sessions, engage in demos and much more. Their 2017 Roadshow tour is designed to highlight and showcase innovative talent in the Toronto & Waterloo startup and tech communities. They help bring local founders, tech enthusiasts, and investors together to showcase new talent and ideas and to foster innovation.

 

 

This is StartupTech’s inaugural launch of roadshows and summits and they are on a mission to promote  growth and support talent in the North American tech ecosystem! StartupTech Unleashed started out as a simple group to help share ideas, foster support and assist fellow business owners. It has evolved from a small business group to a large organization with members and events in multiple cities.

 

 

Keep your eyes peeled for members of Clausehound.com’s team at all StartupTech Unleashed events! As a member of the startup community, Clausehound continues to grow our business and network by meeting other up-and-coming entrepreneurs at these events!

For more information, please see StartupTech Unleashed’s 2017 event calendar

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Clausehound.com is excited to announce a new collaboration with Cyberbahn – a Thomson Reuters Business

 

Clausehound.com is thrilled to announce a new collaboration with Cyberbahn, a Thomson Reuters business. This initiative aims to offer Clausehound users the ability to use Cyberbahn products directly from Clausehound’s learning materials and agreement drafting tools. This added functionality will enable entrepreneurs to access Cyberbahn’s full suite of entity management, incorporation, registration and information filing services as a direct link from Clausehound.com.

 

Click the image below to see Cyberbahn’s full suite of legal tools!

 

About Cyberbahn: Cyberbahn is committed to providing real-time legal support services that exceed your expectations, helping you achieve better results for your business & clients. Cyberbahn’s services include many crucial corporate governance and registration services, including: corporate and business searches, comprehensive name searches, corporate database management software, corporate information filings, and business incorporation and registration services. No matter what your business requirements are, Cyberbahn’s services will help your business be more productive than ever.

 

 

About Clausehound.com: Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Our $10 per month DIY Legal Library hosts tens of thousands of legal clauses, contracts, articles, lawyer commentary and instructional videos. Our professional version offers a concierge service that will assist you to should you have any questions while trying to source an agreement.

 

Clausehound

 

We’re both very excited to be support local business growth and enable entrepreneurs to pursue their business dreams!

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Do you run a social enterprise? Apply to the Booking.com Booster to be eligible for up to €500,000 in grants!

Clausehound.com’s community partner, Impact Hub, is launching a social accelerator in conjunction with Booking.com. If you operate a startup that has a positive impact on the environment, preserves and promotes cultural heritage, or seeks to promote inclusive growth in tourism that supports local communities, we encourage you to apply to the Booking.com Booster by March 1, 2017 to be eligible for up to €500,000 in grants!

 

About Booking.com Booster:

The program will culminate with grants of between €100,000 to €500,000 given to a number of the finalist ventures, with a total pot of €2 million available. The accelerator will have 8-12 finalists who will be invited to Amsterdam from June 5-23 where Impact Hub Amsterdam and Booking.com will co-deliver a scaling accelerator. Finalists will receive mentorship from Booking.com and Impact Hub for 6-9 months following the accelerator.

 

 

For further information about the Booking.com Booster, please visit https://booster.bookingcares.com/

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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