Our regular readers will remember our previous posts in this series where we provided an introduction to arbitration clauses and highlighted some of the major enforceability issues . In this post, we discuss some important considerations when drafting arbitration agreements.
What should employers think about when drafting arbitration clauses?
- Rules and Procedure: As mentioned in our previous posts, the provincial arbitration statutes provide basic frameworks for arbitration agreements. However, given the flexibility afforded to parties through the arbitration process, employers may wish to specify additional procedures in order to facilitate a speedy and economic resolution. Although the employer can choose to select and outline particular procedures itself, there are also a number of arbitral institutions whose comprehensive rules can be relied upon instead.
In addition to procedures for the arbitration itself, parties can specify preconditions to arbitration, such as mediation or negotiation. If a multi-step process is used, the employer should also clearly indicate the time periods in which those steps will be deemed to have been completed, to help minimize delays.
- Administration and Arbitrators: Parties can decide whether to have the dispute arbitrated by an arbitral institution. Employers who prefer not to proceed with a particular institution may specify a list of acceptable arbitrators or simply a method for choosing the arbitrator, including identifying particular expertise that the arbitrator should have. Employers can also choose between having the dispute decided by a single arbitrator or a panel of arbitrators.
- Scope: Parties to arbitration agreements tend to prefer broad and more comprehensive language when setting out the scope of the agreement, although employers can choose to exclude certain issues from the purview of the arbitrator, such as disputes around restrictive covenants or requests for injunctive relief. However, employers should be cautious to ensure that any exclusion clauses are fair to the employee, as arbitrators may otherwise decide that these clauses are not enforceable.
- Legal Venue: Although the employment agreement will likely have its own governing law, the arbitration agreement should indicate the “seat” of arbitration (e., the place whose procedural law will govern the arbitration, including appeal or judicial review mechanisms).
- Interim Measures: Employers can include a clause that provides the parties an opportunity to seek interim relief, such as a temporary injunction, before the arbitrator or panel is chosen.
- Confidentiality: In most provinces, there is no legislative restriction on the degree to which parties, witnesses, and other non-parties may discuss the arbitral proceedings and the ultimate award. However, one benefit to arbitration agreements is that the parties can include confidentiality provisions . Parties may wish to identify the scope of the confidentiality provision as covering the entirety of the proceedings, as well as the award, and to enter into additional confidentiality agreements with the arbitrator and any witnesses. However, parties should be aware that complete confidentiality may not be possible, for example, when seeking to challenge or enforce the award through the courts.
- Costs and Remedies: Parties can specify the arbitrator’s power to order particular remedies, as well as the allocation of the costs of arbitration. The arbitration agreement can also include a reasonable timeframe within which the arbitration decision must be rendered.
The above list highlights just some of the issues that an employer should consider when drafting an arbitration clause. Given the length of these clauses, employers may wish to draft a separate arbitration policy and incorporate it by reference into employment agreements, rather than setting out the terms in each contract. In light of the complexity of some arbitration agreements, consulting with counsel is always advisable.
Be sure to check back for the final post in our arbitration series, in which we will discuss the enforcement and appeal of arbitral awards.