The Conditions Precedent: Arbitration Clauses in Employment Contracts

Posted on: Tuesday, December 30th, 2014

Massachusetts, through both statutory and case law, heavily favors arbitration in lieu of judicial intervention. When employees and employers clearly contract to settle discrimination claims through arbitration – or similar alternative dispute resolution mechanisms – various courts have held arbitration agreements enforceable before parties seek alternative relief. Thus, skilled practitioners will carefully review their clients’ employment agreements before seeking recourse from a particular forum. Failure to do so may lead to wasteful litigation costs and being booted from certain venues.

As recently as last month, the Massachusetts Court of Appeals dealt with a Beth Israel Deaconess Medical Center physician who had contractually agreed to “finally settle” any dispute through arbitration in Minkina v. Frankl, No. 13-P-1480. The employee also irrevocably waived any “right to redress any such dispute other than by such arbitration.” Id. Forgoing arbitration, the employee sought relief from the Massachusetts Commission Against Discrimination under G.L. c. 151B. Id. In the lower court, the Superior Court found the employee’s claims arbitratable and, thus, ordered arbitration.

Minkina’s facts are similar to the 2011 Supreme Judicial Court’s decision in Joule v. Simmons, where the Court held that an employer has a right to compel arbitration where the parties have expressly agreed to it through the employment contract. 459 Mass. 88, 90. That case was argued successfully by Holtz & Reed’s Tom Reed and Jay Sullivan. In Joule, Justice Botsford wrote, “If an employer and employee enter into a valid and sufficiently clear agreement to arbitrate any and all disputes relating to discrimination, then the party seeking arbitration of such a dispute is entitled to have the agreement enforced.” 459 Mass. at 98. Cognizant attorneys for both employees and employers are wise to review the employment agreement’s conditions precedent before filing a lawsuit.

Interestingly, such agreements have been held enforceable in English courts as well. In the case of Emirates Trading Agency LLC v. Prime Mineral Exports Private Limited, the English High Court said that where parties agreed to “friendly discussions” prior to arbitration, they must comply with such procedures prior to subsequent steps. [2014] EWHC 2104 (Comm) (Eng.). Employers drafting such contracts should clearly and sufficiently outline the alternative dispute resolutions they seek and employee’s attorneys should be well-aware of those mechanisms before seeking relief in state and federal court.

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