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Dangers of Dispute Resolution Clauses in Employment Contracts

They’re often called “boiler-plate” clauses, and most employment contracts are filled with them: those little subsections in a contract that are pre-written and appear very official, stipulating all sorts of small details about the agreement. These clauses cover everything from vacation and paid time off to various benefits and diversity policies.

One of the most common, and potentially most dangerous, clauses in an employment contract is the dispute resolution clause. If you are entering into a new employment contact, it is important to understand dispute resolution clauses and to understand your rights.

What is a Dispute Resolution Clause?

As the name suggests, a dispute resolution clause is a clause within a contract that stipulates the procedures and instruments for resolving any disputes that arise among the parties in the course of fulfilling a contract. These clauses exist in almost any kind of contract.

What Are the Problems with Dispute Resolution Clauses?

In the vast majority of employment contracts, there is no problem with a dispute resolution clause. Because no disputes arise in the course of the contract, the dispute resolution stipulations never have any impact.

However, it is the times when disputes arise that these contracts matter. The problem with dispute resolution contracts is that they usually stipulate that disputes will be resolved outside of traditional litigation.

Again, most of the time, this is fine, but in some cases, the employee is much better served being able to take the case to court.

What Are Your Rights?

It is important to recognize your rights both on the front end, before signing the contract and afterwards, when a dispute arises.

On the front end, it is important to remember that a contract does not come into effect until you sign it. All those official looking clauses are not set in stone. You have every right to look over the fine print and negotiate any of the clauses a contract contains.

Realistically, sitting with a prospective employer and negotiating the dispute resolution clause in your contract is something you should only do if you are signing onto a very high-paying, prestigious job, and only if you really think there could be problems down the road.

Once you are in a contract and a dispute arises, it is important to remember that the terms of a dispute resolution contract can often be beaten. Certain situations and creative legal work can nullify or override the agreement to resolve issues outside of the court.

The most important thing you can do – whether you are entering into a new employment contract or facing a dispute with your employer – is to work with a skilled, experienced attorney to make sure you are protecting your rights and your future.