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Arbitration Lesson #2 - Contract
July 09, 2006 by Ross Runkel at LawMemo

Without a contract agreeing to arbitrate, there is no legal duty to arbitrate. That's the main rule.

If there is an agreement to arbitrate, then courts will enforce that agreement and make the parties arbitrate rather than litigate a dispute.

Because arbitration is controlled by the law of contracts, it is important to know (1) whether there is an agreement to arbitrate and (2) what the arbitration agreement provides.

Is there an agreement to arbitrate?

In a unionized workplace, with a collective bargaining agreement (CBA), there is almost always an agreement to arbitrate disputes that arise out of the CBA. Disputes about wages, demotions, suspensions, and discharge get resolved in arbitration rather than in the court system.

In a non-unionized workplace, some employers (certainly not all) require that employees agree to arbitrate disputes. The arbitration agreement might be found in an employment application form, in a hiring letter, in an employee handbook, in a separate employment agreement, or in a separate agreement dealing only with arbitration. The agreement typically says that all disputes that arise in the future have to be resolved through arbitration.

Both federal and state statutes say that courts must enforce written agreements to arbitrate. The statutes say "written." They don't say "signed." Although most arbitration agreements are in fact signed, there is no requirement that they be signed so long as there has been an agreement.

Even though an employer requires an employee to agree to arbitration in order to get hired, that is still an agreement.

Some agreements are so unfair that a court will not enforce them, and we'll cover that in a later lesson. But courts do not consider the agreement to arbitrate, all by itself, to be unfair.

Sometimes employees try to avoid arbitration by saying that they did not get a copy of the arbitration agreement, or did not read the agreement, or did not understand the agreement. Most courts say a person is bound by a contract if they signed it, even though they didn't read it or understand it. On the other hand, courts often overturn arbitration agreements that are obtained though trickery, or when an employee didn't get a chance to read it.

What does the arbitration agreement provide?

Arbitration agreements are not all the same. They often spell out in detail what disputes are covered, who the arbitrator will be or how the arbitrator will be selected, and some of the procedures to be followed. More on this in later lessons.

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