[email protected] ERIC M TRELZ€¦ · Co-authored with Bryan LeMoine Nov 2009 Social Networking Sites: A Useful Tool or a Dangerous Trap for Employers? Missouri Chamber of Commerce

Departments

Practice Areas

EducationJ.D., Saint Louis

University, 1987 B.A., Central Methodist

University, 1980

AdmissionsIllinois, 1988 Missouri, 1987

Court AdmissionsU.S. Court of Appeals,

Ninth Circuit, 2006 U.S. District Court,

Central District of Illinois, 2006

U.S. Court of Appeals, Eighth Circuit, 1999

U.S. District Court, Southern District of Illinois, 1988

U.S. District Court, Eastern District of Missouri, 1987

Trial

Labor and Employment Employment Litigation Business Litigation

[email protected] St. Louis

Phone: 314.889.7070Fax: 314.727.7166

ERIC M TRELZ Shareholder

As a nationally respected litigator, Eric M. Trelz provides clients significant expertise in trial work, primarily in the areas of employment law and complex commercial litigation. His approach to litigation focuses on the needs of the client in an effort to solve the problem in a way that fulfills the client’s goals. Mr. Trelz has represented major corporations and privately owned businesses in hundreds of cases, many generating published opinions.

Mr. Trelz believes the client is represented best by an assertive lawyer who has the vision, skill and experience to take the case to verdict, if necessary. In the event trial is the most prudent course, Mr. Trelz’ substantial trial experience, gained from more than 20 years of practice and over 50 trials to completion, serves his clients well. In addition, he has handled multiple class action lawsuits in both state and federal courts, including the City of St. Louis and Madison County, Illinois.

Clients from an extensive range of industries seek Mr. Trelz’ representation, including banking and financial services, manufacturing, wholesale and retail entities, transportation, health care, automotive, food services, entertainment and construction. As part of his effort to serve all aspects of his clients’ employment law needs, Mr. Trelz is available for counsel for seemingly routine hiring issues up through appellate practice. He has litigated virtually every form of employment dispute in multiple venues including appellate courts, federal and state courts and federal, state and local administrative agencies.

Memberships and Affiliations

■ The Missouri Bar ■ Illinois State Bar Association ■ American Bar Association, Employment and Labor Law Section ■ Bar Association of Metropolitan St. Louis, Volunteer Lawyers’ Program ■ Missouri Organization of Defense Lawyers ■ Youth Athletics, Baseball and Football Coach ■ Polsinelli Shughart MS Bike Ride Cycling Team Captain ■ Family Support Network, Member, Board of Directors

Distinctions

■ AV Preeminent Rating by Martindale Hubbell ■ Staff member and primary editor, Saint Louis University Law Journal

EXPERIENCE

Representative Work

■ John Beal, Inc. v. Anthony Grossman, et. al., April 19, 2009, obtained a preliminary injunction against defendant's breach of a non-compete agreement.

■ Fiserv Solutions, Inc. v. Peoples National Bank, N.A., January 21, 2009, successfully defended Peoples National Bank in a $1,100,000 breach of contract claim.

■ Nationwide Transport Finance v. Cass Information Systems, Inc., F.3d, 2008 WL

1849165 (C.A.9 (Nev.)), April 28, 2008, jury verdict in favor of Cass Information Systems, Inc. affirmed by United States Court of Appeals for the Ninth Circuit

■ Coy v. Washington County Hospital District, et al., 2007 WL 1098254, 35 Media L. Rep. 1554, Ill. App. 5 Dist., April 09, 2007, first case in Illinois to hold that a patient’s name is protected medical information.

■ Blake and Davis, LLC, et al. v. Joe Riley, et al., successfully defended the clients from a $30 million claim for intentional interference with contract and from attempts to obtain injunctive relief preventing them from doing business, November 2006.

■ Bloom v. Metro Heart Group of St. Louis, Inc. 440 F. 3d 1025, 11 Wage & Hour Cas. 2d (BNA) 489 (C.A.8 (Mo)), March 16, 2006, further clarified the employer’s obligations when requiring return to work certifications under the FMLA.

■ Nationwide Transport Finance v. Cass Information Systems, Inc., obtained a jury verdict in favor of Cass Information Systems, Inc. in an intentional interference with contract claim seeking $4.2 million in damages plus punitive damages, March 14, 2006, U.S. District Court, Nevada.

■ State ex rel. Leonardi v. Sherry, 137 S.W. 3d 462, (Mo. 2004), July 1, 2004, changed Missouri law concerning the Equitable Cleanup Doctrine.

■ PepsiCo, Inc. v. Baird, Kuntz & Dobson, LLP, 305 F. 3d 813, 59 Fed. R. Evid. Serv. 523 (C.A.8 (MO)), September 19, 2002

■ Mahoney v. Warren County, 206 F. 3d 770 (C.A. 8 (Mo.)), March 13, 2000. ■ Mueller v. Hopkins and Howard, P.C., 5 S.W. 3d 182, 15 IER Cases 1197, Mo. App.

E.D., October 26, 1999, held that for employment contracts affecting interstate commerce, the FAA preempts state law.

NEWS

November 25, 2009

PUBLICATIONS & PRESENTATIONS

2010 Cross-Examining the PlaintiffDefense Research Institute, Employment Law Trial TacticsCo-authored with Bryan LeMoine

Nov 2009 Social Networking Sites: A Useful Tool or a Dangerous Trap for Employers?Missouri Chamber of Commerce and Industry Newsletter, Volume 104Article co-authored by Eric Trelz and Elizabeth T. Gross

Sept | Oct 2009

What Can Employers Expect From the EEOC Under the Obama Administration?St. Louis Commerce Magazine

April 2009 To Arbitrate or Not To Arbitrate — What Should a Responsible Bank Do? BankNews

2009 Alternative Dispute Resolution - Is It Really Better to Resolve Employment Disputes Out-of-Court?Polsinelli Shughart

2009 Board of Directors EducationWashington County Hospital Board of Directors

2009 FMLA: What Employers Need to Know About the New RegulationsPolsinelli Shughart

2009 To Arbitrate or Not to Arbitrate - What Should A Responsible Bank Do?

BankNews

Aug 2008 Can a Workplace Bully Subject Your Bank to LiabilityBankNews

2008 Minimizing Risks When Hiring Your Competitors' EmployeesLorman Educational Services

2008 Potentially Dangerous ‘Me Too’ Evidence May Be Admissible . . . Or It May NotCommon Law Journal

2008 Supreme Court Leaves it to the EEOC to Determine What Constitutes a ‘Charge’ Under the ADA Common Law Journal

2008 Annual Employment Law UpdatePolsinelli Shalton Flanigan Suelthaus

Aug 2007 Effective Employment PracticesPolsinelli Shalton Flanigan Suelthaus

2007 Effective Employment PracticesThe International Group

2007 Individual Liability Under Missouri LawPolsinelli Shalton Flanigan Suelthaus

2006 Avoiding Liability for Violating an Employee’s Privacy Rights Council on Education in Management

2006 Shielding Your Organization From Liability in Failing to Make Reasonable AccommodationsCouncil on Education in Management

2006 Update on New and Emerging Employment Law Challenges in 2006Council on Education in Management

2004 Fraud Prevention in Mortgage LendingCreveCor Mortgage, Inc.,

Aug 2003 Effective Employment PracticesThe International Group

2002 Complying with Overlapping FMLA, ADA, Pregnancy, Worker’s Comp and State Leave LawsCouncil on Education in Management

2002 Employment Practices LiabilityShand Morahan & Company

02/04/2001 Annotation of Missouri Rule of Civil Procedure 72.01Missouri Practice Volumes

1

To Arbitrate or Not?Deciding Whether to Arbitrate and

Drafting Effective Arbitration Provisions

Presented by: Eric M. Trelz

©2010 Polsinelli Shughart PC

Arbitration

Neutral third-party decision makerAdversarial hearing

Decision is final and binding

Conducted only upon agreement

September 2010

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Mediation

Neutral third-party help parties reach mutually agreeable solutionCan be used whether or not litigation/arbitration pendingConfidentialNot final and binding

September 2010


Litigation

State or federal courtRight to conduct discoveryAdversarial hearingDecision makers are a judgeand juryDecision may be appealed

September 2010

3


Comparison

Arbitration, Mediation or Litigation…

September 2010

A Comparison


Comparison (continued)

ProcedureConfidentialityExpertise of Decision makerDiscovery

September 2010

4


Comparison (continued)

DiscoveryTime for ResolutionCostReview

September 2010


To Arbitrate or Not?

Pros and Cons

September 2010

5


To Arbitrate or Not? (continued)

InformalitySpeedCostChoice of Decision maker

September 2010


To Arbitrate or Not? (continued)

Confidentiality

Finality

Bypass of Administrative Process

No Rules of Civil Procedure or Evidence

September 2010

6


Drafting Suggestionsfor Arbitration Provisions

September 2010


Drafting Suggestions

The basics –– Arbitration provisions are

contracts– There is no perfect form

or model

September 2010

7


Drafting Suggestions (continued)

Clear and Noticeable Language.Which rules?Where?

September 2010



What law?How many arbitrators?Discovery?Who pays?Who will know?When?

What law? How many?

Who pays?

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Carve-outs?– Injunctive relief– Want court’s enforcement

powers – contempt

September 2010


Conclusion

If you are going to include an arbitration provision in your employment agreements,make sure it fits your needsand that it is tailored to the situationTalk to your legalcounsel!!

September 2010

9


About the Presenter

Eric M. Trelz

Polsinelli Shughart PC7733 Forsyth Blvd.

12th FloorClayton, MO 63105

Phone: 314.889.8000Fax: 314.727.7166

[email protected]

As a nationally respected litigator, Eric M. Trelzprovides clients significant expertise in trial work, primarily in the areas of employment law and complex commercial litigation. His approach to litigation focuses on the needs of the client in an effort to solve the problem in a way that fulfills the client’s goals. Mr. Trelzhas represented major corporations and privately owned businesses in hundreds of cases, many generating published opinions.

You may also visit us on the web at: www.polsinelli.com.

September 2010

To Arbitrate or Not?Deciding Whether to Arbitrate and

Drafting Effective Arbitration Provisions

1

To Arbitrate or Not? Deciding Whether to Arbitrate and Drafting Effective Arbitration Provisions

Eric M. Trelz, Esq.

______________________________________________________________________________

With employment discrimination and other workplace claims on the rise, employers have increasingly sought alternatives to avoid traditional litigation. Arbitration has become popular among employers for this very reason. However, before making a determination whether arbitration is the most appropriate for your organization, it is important to understand all of the systems available for dispute resolution—namely arbitration, mediation and litigation. It is also critical to ensure that agreements to arbitrate disputes are comprehensive and carefully considered. Therefore, this discussion will compare the various dispute resolution systems, will touch on the pros and cons of arbitration, and will provide suggestions for drafting effective arbitration provisions once you have made the decision that arbitration is appropriate for your company.

I. Dispute Resolution Systems

Employers have several dispute resolution options: litigation in state or federal court or “alternative dispute resolution” (“ADR”), which includes arbitration and mediation. Arbitration involves one or more neutral third parties who are chosen or agreed to by the disputing parties and whose decision is generally final and binding. Arbitration is akin to litigation in that it generally involves discovery, an adversarial hearing on the merits, and a binding decision. Unlike traditional litigation, the arbitration decision cannot be reviewed or overturned absent exceptional circumstances. Disputes are subject to arbitration only when the parties have agreed, either in writing or orally, to arbitrate the claims.

Mediation involves a neutral third party who tries to help the disputing parties reach a mutually agreeable solution but whose decision is generally not binding. Mediation can be used in virtually any setting, whether or not there is a pending lawsuit or arbitration. Like other settlement discussions, mediation is considered to be confidential, and statements made in mediation are not admissible in any legal proceeding. If the dispute is resolved, the parties sign a settlement agreement setting forth the terms of the resolution. If a settlement is not reached, the parties are free to seek another form of dispute resolution.

Most people and companies are very familiar with the litigation process. In the employment context, the employee can file the lawsuit in the appropriate state or federal court after exhausting all administrative remedies. Typically, the case is assigned to a judge who will handle the matter from discovery all the way through trial. The parties will exchange interrogatories and requests for production of documents and produce witnesses for depositions. In the event a trial is necessary, the parties usually have their dispute heard by a jury. In litigation, the judgment can be appealed.

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A more detailed comparison of the dispute resolution systems is included below:

Characteristic Mediation Arbitration Litigation

Process to initiate

Mediation can be formal or informal. If informal, all the parties need to do is agree to meet and discuss resolution of the case. If formal, the parties must contact a professional mediator and obtain a date available on his/her calendar for the mediation.

The complaining party must file a demand for arbitration. The arbitration agreement should specify the governing body and the procedures for filing the demand. Filing the demand triggers the opposing party’s obligation to respond.

The plaintiff must prepare a complaint, file it, have the clerk issue a summons and have the sheriff serve the summons and complaint on the defendant(s).

Location

The parties may agree on the location of mediation.

The parties may agree on location of arbitration.

Although the parties may agree to venue, in most cases, venue is controlled by state or federal law.

Filing Fees

There are no filing fees concerning mediation; however, the parties must compensate the mediator in formal mediations.

Filing fees vary, depending upon the sanctioning body and the amount in controversy.

Filing fees usually are no greater than $250 regardless of the amount in dispute.

Procedure

If informal, the parties usually decide upon the procedure. If formal, the parties usually follow the procedure dictated by the professional mediator. That procedure usually requires parties to prepare a confidential mediation statement for submission to the mediator.

Procedure is governed by the arbitration agreement and the rules of the sanctioning body.

Procedure is governed by federal and/or state law.

Confidentiality

Mediation is a confidential process. Statements made in mediation are inadmissible in court.

Arbitration can be confidential, as long as one party does not have to sue to enforce the arbitration award.

Court cases are public records and, therefore, can be viewed by anyone who requests the file.

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Decision Maker

The parties are the decision makers. They decide to either resolve the dispute or to terminate the mediation.

The parties select an arbitrator who will be the decision maker. In some circumstances, the parties will select more than one arbitrator, pursuant to the applicable rules and regulations.

The clerk of court assigns the matter to an available judge, depending upon a random assignment system. The judge or, if applicable, the jury will be the decision makers.

Expertise of Decision Maker

The parties decide who to utilize as a mediator and whether or not to resolve the dispute. Mediators often have an expertise in a particular area of law; however, mediators do not have to be lawyers.

The arbitrator is usually a lawyer who practices in the area of law relevant to the dispute; however, arbitrators do not have to be lawyers.

The judge is an expert on the Rules of Civil Procedure. Federal judges are well-versed in employment laws and regulations. Due to recent changes in state law, which have caused an increase in state employment case filings, state law judges are becoming much more familiar and comfortable with the applicable rules and regulations.

Discovery

There is no discovery in mediation.

Most arbitration cases involve discovery; however, the parties can agree to forego all or some forms of discovery.

Traditional forms of discovery are allowed in litigation. A party is not required to submit discovery requests or to conduct depositions; however, a party must respond to the opposing party’s discovery requests.

Time for Resolution

Mediation is the quickest form of dispute resolution. Parties can conduct informal mediation virtually any time. Formal mediation can be conducted as soon as the parties are able to locate an available professional mediator.

The parties can agree upon the timeframe within which the arbitration must be completed. Absent an agreement, the arbitration can take as long as traditional litigation.

Depending upon the venue, the parties can get a trial date within 12 to 18 months of filing.

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Cost

Mediation typically has the lowest cost of the dispute processes. Informal mediation may have no cost at all. Formal mediation typically costs anywhere from $500 to $5,000.

The cost of arbitration is generally higher than that of mediation and can approach or exceed the cost of litigation depending upon the procedures used (e.g., when the parties conduct discovery).

Depending upon the complexity of the issues involved, litigation can be very expensive, particularly if a party takes an appeal.

Result

The parties determine the result. They either settle the case or agree to an impasse.

The arbitrator issues an award.

In jury cases, the jury will issue a verdict and the court will enter judgment based upon the verdict. In court-tried cases, the judge will issue a judgment.

Review

N/A other than enforcement of potential settlement.

No traditional appellate review, and recourse regarding decision extremely limited.

Post-trial motions, and full appellate remedies available.

II. To Arbitrate or Not?

In the employment setting, arbitration has been very popular. However, it is important to consider some of the pros and cons of arbitration before determining whether arbitration is right for your organization.

Informality. Arbitration can be a more informal process than litigation in the sense that it takes place outside a courtroom and may not be regulated by complex rules of civil procedure and evidence. However, arbitration is still an adversarial process in which parties make opening statements, examine witnesses, and make closing arguments—just like in a trial.

Speedier resolution of dispute. In general, arbitration yields speedier results for disputing parties. In arbitration, the parties can agree to certain timetables and procedures in advance to quicken the pace of the process. However, where the traditional methods of discovery are used or where the parties do not have an agreement regarding the timeframe, arbitration may take just as long as traditional litigation.

Cost. The overall cost of arbitration is generally less than litigation, but that is not always the case. Depending on the issue and the procedures used, it is possible for the cost of arbitration to approach or exceed the cost of litigation. Arbitration can also be less expensive in terms of non-monetary costs such as employee distraction and morale because arbitration can be a faster and simpler process.

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Choice of Arbitrator. In litigation, clerks typically assign cases to judges without input from the parties. In arbitration, the parties are free to select an arbitrator.

Confidentiality. Arbitration, unlike litigation, is a private process, and the parties can agree to confidentiality. In litigation, filings with the court are a matter of public record unless unusual circumstances require the Court to seal the file.

Finality of arbitrator’s decision. An arbitrator’s decision is final and unreviewable absent exceptional circumstances. This leads to lower costs, but can be detrimental to an employer that is “stung” by an arbitrator’s decision. Judgments in litigation are subject to appeal.

Bypass of administrative process. Arbitration provisions can be utilized to bypass the administrative process (i.e., charges of discrimination filed with the Equal Employment Opportunity Commission (“EEOC”) or similar state agencies), provided the claimant agrees to forego the administrative process. In some cases, this may save employers time and money. However, in bypassing the administrative process, employers may be giving up an advantage. Employees understand that when they file a charge of discrimination with a federal, state or local administrative agency, there will be an investigation and a decision regarding the complaint. When an administrative agency tells a former employee that there is no probable cause to believe that a violation of the law has occurred, that employee, in 85% of the cases, will not file a lawsuit. By utilizing arbitration agreements, the employer may be giving up this significant advantage. Moreover, it is important to note that an employee’s agreement to arbitrate does not restrict the EEOC’s right to file a lawsuit against the employer. If an employee who has agreed to arbitrate a dispute files a charge of discrimination, the EEOC may still investigate the charge and file suit.

No rules of civil procedure or evidence. The arbitration process is an adversarial process. At the hearing, witnesses will testify and documents will be admitted into evidence. If the arbitrator is not familiar with or the parties have agreed not to use the rules of civil procedure or the rules of evidence, the hearing can quickly get out of hand. Irrelevant and immaterial evidence will be heard and received. Witnesses will be allowed to testify regarding hearsay and inadmissible opinions. This situation may increase the length of the hearing and unnecessarily complicate the issues.

III. Recent Case Law

Arbitration provisions have always been the subject of judicial scrutiny. Below is a summary of notable state and federal cases in recent years.

State and Federal District Court Cases

Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15 (Mo. Ct. App. 2008). Hallmark Cards, Inc. (“Hallmark”) instituted a dispute resolution program, which provided that arbitration would be employees’ exclusive means of resolving employment-related claims. The program provided that employees who continued to work for Hallmark after institution of the program would be deemed to have agreed to arbitrate claims. Hallmark was not similarly bound to submit disputes to arbitration. A former employee brought age discrimination and retaliation

6

claims against Hallmark in state court, and Hallmark sought to compel arbitration. Held: Parties may enter into contracts to arbitrate employment disputes; however, Hallmark’s program did not constitute an enforceable contract because the program was unilaterally imposed by Hallmark on at-will employees, lacked consideration, and did not impose mutual obligations on both Hallmark and employees.

Kunzie v. Jack-in-the-Box, Inc., --- S.W.3d ---, 2010 WL 779367 (Mo. Ct. App. 2010). Jack-in-the-Box, Inc. (“Jack-in-the-Box”) required at-will employees to sign a “Jack In The Box Dispute Resolution Agreement” as a condition of employment. The last page of the agreement stated, “I understand that my employment by Jack in the Box . . . is automatically subject to the terms of this Agreement if I continue my employment . . . after 1-14-2004.” A former employee filed race and gender discrimination claims against Jack-in-the-Box in state court, and Jack-in-the-Box sought to compel arbitration. Held: Continued at-will employment, alone, is not sufficient evidence of intent to be bound by an arbitration agreement. An existing employee’s intent to be bound by an arbitration agreement must be unequivocal and based on facts beyond mere continued employment.

Leatherberry v. Village Green Management Co., 2010 WL 546871 (E.D.Mo. 2010). Village Green Management Company (“Village Green”) had a page of its Associate Handbook entitled “Acknowledgment of Associate Handbook” by which employees who signed the Acknowledgment agreed to arbitrate employment-related disputes. A former employee brought a race discrimination claim against Village Green in federal district court, and Village Green sought to compel arbitration. Held: The agreement to arbitrate contained on the Acknowledgment form was enforceable, as the employee agreed individually to arbitrate, the employee signed an agreement that was on a separate page of the Associate Handbook, and the arbitration provision obligated both the employer and employee to arbitrate. In Missouri, an employee handbook cannot serve as an enforceable contract. The Court considered the Acknowledgment form to be separate from the handbook and, therefore, enforceable.

United States Supreme Court Cases

14 Penn Plaza LLC et al. v. Pyett et al., 129 S.Ct. 1456 (2009). The respondents were members of the Service Employees International Union (“union”), the exclusive bargaining representative of employees within the building services industry in New York City. The collective bargaining agreement between the union and the Realty Advisory Board on Labor Relations (“RAB”), a multi-employer bargaining association for the New York City real-estate industry, required union members to submit all employment-related claims to binding arbitration. The respondents asked the union to file grievances alleging age discrimination. The union initially requested arbitration, but later withdrew the claims because of a separate contract with RAB. The respondents filed charges of discrimination with the Equal Employment Opportunity Commission, which issued right to sue letters. The respondents filed suit, and the petitioners sought to compel arbitration. Held: A provision in a collective bargaining agreement that clearly and unmistakably requires members to arbitrate claims under the Age Discrimination in Employment Act is enforceable as a matter of federal law.

Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., 130 S.Ct. 1758 (2010). This was not an employment-related case; however, the holding could be applicable to

7

employment-related disputes. AnimalFeeds International Corp. brought a class action antitrust suit against petitioners for price fixing. The case addressed the issue of whether it is consistent with the Federal Arbitration Act to impose class arbitration where an arbitration clause is silent on class treatment. Held: A party may not be compelled under the [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.

Rent-A-Center, West, Inc. v. Antonio Jackson, --- S.Ct. ---, Slip No. 09-497 (2010). Rent-A-Center, West, Inc. (“Rent-A-Center”) and an employee, Antonio Jackson, entered into an Agreement to Arbitrate Claims, which Jackson signed as a condition of employment and which precluded him from pursuing employment-related disputes in court. The Agreement further provided, “[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.” Jackson filed an employment discrimination claim in federal court, and Rent-A-Center sought to compel arbitration. Jackson argued that arbitration should not be compelled because the Agreement was unenforceable. Held: The parties’ agreement expressly gave the arbitrator the authority to determine whether the agreement was void, enforceable, or unconscionable.

Granite Rock Co. v. International Brotherhood of Teamsters et al., --- S.Ct. ---, Slip No. 08-1214 (2010). After the expiration of their collective bargaining agreement and an impasse in negotiations, the local union (“union”) initiated a strike against Granite Rick Company (“Granite Rock”). Granite Rock and the International Brotherhood of Teamsters (“IBT”) eventually agreed to a new collective bargaining agreement containing arbitration and no-strike clauses, but could not reach a separate back-to-work agreement. The union continued to strike, and Granite Rock filed suit for breach of the new collective bargaining agreement. The union argued that the new collective bargaining agreement was never validly ratified and moved to send the dispute over the ratification date to arbitration. Held: Whether parties have agreed to arbitrate a particular dispute is an issue for judicial determination absent an agreement committing the issue to an arbitrator.

IV. Drafting Suggestions for Arbitration Provisions

If you have decided that arbitration is right for your organization, you need to draft the agreement to arbitrate. However, before drafting an arbitration provision, it is important to understand two basic concepts: (1) Arbitration is created by a contract among the parties. In this regard, it is just like any other contract and may be subject to traditional challenges to contracts; and (2) it is also critical to understand that there is no model or perfect form arbitration provision. Just like any other contract, an arbitration provision within a contract must be tailored and should be thoughtfully developed to address the organization’s needs and be consistent with the law.

The options and terms for an arbitration provision set forth below are not exhaustive. The information is being provided for your assistance in understanding how arbitration provisions can differ and to help you identify the terms to use when the decision is made to use an arbitration provision.

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Clear and Noticeable. In order to ensure a binding agreement to arbitrate, the arbitration provision should be clear and noticeable and should specify the matters covered (e.g., all matters relating to your employment or termination of employment including, but not limited to, alleged violations of Title VII of the Civil Rights Act of 1964 . . .”).

Rules. One of the most important terms of an arbitration provision is what rules apply. There are numerous organizations that sanction arbitrations and conduct them under defined rules and procedures. The American Arbitration Association (“AAA”) is the best known of these organizations. Make sure you are aware of the rules you are selecting. You should select an organization whose fees are reasonable and whose rules are not onerous.

Venue. Once the employer has decided on the applicable rules, it usually decides the venue of the arbitration. Typically, the venue is the location of employment. For example, if the employee is employed in Kansas City, venue of the arbitration should be in Kansas City. This will be the most efficient forum for all parties. If, however, the employee worked in Kansas City and the company is headquartered in Chicago, with no Kansas City facilities, it is appropriate to make Chicago the location of the arbitration.

Governing law. Another important term to consider is what law should apply to the dispute. Much like venue, the law that applies should be the state where the employee is employed. Nonetheless, the parties may select another law to be applied.

Number of arbitrators. The parties may also determine the number of arbitrators, provided it is an odd number. Arbitrations are often conducted by one arbitrator; however, panels of three (3) are not uncommon. Including more arbitrators increases the expense. Sometimes parties agree to one arbitrator for a smaller claim (less than $50,000) and three (3) arbitrators for a larger claim (claims of $50,000 or more).

Discovery. The employer should also decide whether discovery will be allowed and how much discovery will be allowed. If allowed, the employer must realize that the costs of arbitration will increase, but the expense should be offset by the fact that it will have a better understanding of what the evidence will be when the arbitration actually takes place. An employer, however, may wish to prohibit discovery so that it can protect certain sensitive and proprietary information. An employer can also minimize the destructive effect on the work environment by precluding discovery. Such a provision will prevent current employees from having to search for information in response to discovery requests, and it will also preclude employees from having to be deposed during the arbitration. In this regard, decisions can be made in the arbitration provision regarding depositions, interrogatories, document requests, requests for admissions, requests for inspection/physical examination, etc.; however, the parties must be prepared to live with whatever they choose at the time of contracting.

Expenses. Arbitration provisions frequently specify how the arbitrator is to award expenses. The parties may authorize the arbitrator to award expenses as part of the ultimate award, similar to a prevailing party provision. Alternatively, the parties may agree to share the expense of the arbitration as part of the agreement. Please note courts do not look kindly on arbitration provisions that shift a substantial portion of the arbitration expense to one of the parties at the outset, to the extent it precludes a party (usually a plaintiff) from exercising his or

9

her rights to arbitrate under the agreement. An arbitration provision can also include a prevailing party attorneys’ fee provision.

Confidentiality. An employer may want to include language regarding the confidentiality of the arbitration process and proceeding, including the outcome. In order to be effective, there should be some specific penalty or consequence for a violation of the confidentiality provision of the arbitration provision. Unlike litigation, there are no public records, public hearings, legal files available for the public to inspect, etc.

Timeframes. The employer should consider the timeframe within which the arbitration will take place. If no timeframe is specified, arbitrations can languish and end up costing more than necessary. On the other hand, by imposing too short of a timeframe, the employer will add undue stress and pressure to the arbitration process. A reasonable timeframe requires arbitration to be conducted within six to twelve months of the filing of the demand for arbitration. Also, the timing of issues within the arbitration can be agreed upon in advance, such as the length of opening statement, number of witnesses, length of direct examination, length of cross-examination, length of closing, etc. The parties may also want to agree upon a briefing schedule in advance.

Injunctive Relief. Even when arbitration provisions are used, the drafters of such provisions often exclude the right to pursue injunctive relief. Carving injunctive relief out of the arbitration provision allows for parties to pursue their injunctive relief in a court of law, while leaving the issue of damages to be decided through arbitration.

It is important to discuss these issues with your legal counsel while the arbitration provision is being drafted. Instead of simply asking counsel to include such a provision, ask questions based upon the above and make sure the answers are consistent with your needs. If an agreement is worth having an arbitration provision included, it is also worth making sure that it is drafted properly and fits the situation for which it will be used. It is also worth making sure that there are no unique issues regarding applicable state or local law regarding arbitration provisions.

You should now be better equipped to obtain the appropriate information to determine whether to include alternative dispute resolution provisions in contracts. You should also be better equipped to make sure the terms of whatever provisions you choose fit the particular need being addressed by the agreement.

Polsinelli Shughart PC provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship.

Copyright © 2010 Polsinelli Shughart PC.

Documents

[email protected] ERIC M TRELZ€¦ · Co-authored with Bryan LeMoine Nov 2009 Social Networking Sites: A Useful Tool or a Dangerous Trap for Employers? Missouri Chamber of Commerce