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Employment Agreement: Does Your Arbitration Provision Say What You Want It To?

My Contract Law professor in law school said the best contracts plan for the worst case scenarios. With this in mind, employment agreements often contain a provision dealing with the resolution of disputes between the employee and employer. While every employment agreement should contain an arbitration provision, as a Seattle employment lawyer it is important to ensure that the provision operates in a way that is consistent with the desired objective. It is not enough to simply state that any dispute arising under the employment agreement will be resolved via arbitration. An employer with a deficient arbitration provision could easily find itself in the untenable position of arguing against the enforcement of the arbitration provision in the employment agreement it drafted. Such a position will not be well received by the court. In this brief article we look at Washington's utilization of Alternative Dispute Resolution ("ADR") and the key components that an employer should look for when their Seattle employment lawyer drafts an ADR provision in an employment contract. 

Washington's legislature and its courts have confirmed this State's strong public policy favoring arbitration of disputes without resorting to judicial proceedings. RCW 7.04.010; Detweiler v. J.C. Penney Cas. Ins. Co., 110 Wn.2d 99, 112-113, 751 P.2d 282 (1988); Herzog v. Foster & Marshall, 56 Wn. App. 437, 443, 782 P.2d 1124 (1989); Lake Wash. Sch. Dist. v. Mobile Modules Northwest, Inc., 28 Wn. App. 59, 61, 621 P.2d 791 (1980). "[Arbitration] provides a means of giving effect to the intention of the parties, easing court congestion, and providing a method more expeditious and less expensive for the resolution of disputes." King County v. Boeing Company, 18 Wn. App. 595, 602, 570 P.2d 713 (1977). The courts have also made clear that arbitration and litigation should not be pursued concurrently:

"An arbitration proceeding is not had in a court of justice. It is not founded on the filing of a claim or complaint, as they are generally understoond. The very purpose of arbitration is to avoid the courts insofar as the resolution of the dispute is concerned. It is a substitute forum designed to reach settlement of controversies, by extrajudicial means, before they reach the stage of an action in court."

Thorgaard Plumbing v. County of King, 71 Wn.2d 126, 131, 426 P.2d 828 (1967).

This strong public policy manifests itself explicitly in the arbitration statute, RCW 7.04, et seq., and the Legislature has provided mandatory direction to the courts to stay any legal action brought by a party to an arbitration agreement:

"If any action for legal or equitable relief or other proceedings be brought by any party to a written agreement to arbitrate, the court in which such action or proceeding is pending, upon being satisfied that any issue involved in such action or proceeding is referable to arbitration under such agreement, shall upon motion of any party to the arbitration agreement, stay the action or proceeding until an arbitration has been had in accordance with the agreement."

RCW 7.04.030. [Emphasis added]

The Appellate Courts of this State have consistently agreed with the Legislature. In Lake Wash. Sch. Dist, Division One of the Court of Appeals stated:

"The public policy in favor of arbitration supports the rule that arbitration should be pursued before either party is entitled to judicial relief."

28 Wn. App. at 64, 621 P.2d 791 (emphasis added). In the same opinion, the Court reiterated the statutory remedy for premature litigation:

"Ordinarily, if one party initiates court action in spite of an arbitration clause, the other party is entitled to an order staying the litigation."

Id.

In short, courts in Washington State are going to stay litigation if an employment agreement contains an arbitration provision. A  Seattle employment lawyer can help employers avoid being stuck with poorly drafted arbitration provisions. To prevent resolving disputes in an inefficient, inhospitable, or ineffective forum, the following factors should be considered and appropriately incorporated to an arbitration provision:

• Scope: what disputes will the provision cover;
• Mediation: when and how is mediation initiated;
• Selection of Mediator: how is the mediator selected;
• Arbitration: when and how is arbitration initiated;
• Selection of Arbitrator: how is the arbitrator selected;
• Jurisdiction/Venue: how is the court involved and where will the dispute be resolved;
• Notice: how is notice provided;
• Governing Law: what rules will apply during the arbitration;
• Cost: who will pay for the mediation and arbitration; and
• Attorneys Fees: award of attorney fees to the prevailing party.

To learn more about the importance of utilizing an effective and efficient arbitration provision or for assistance in drafting any aspect of an employment agreement, feel free to contact one of the employment lawyers at Lasher Holzapfel Sperry & Ebberson.