Ten Ways to Improve Your Arbitration Clause

Many companies use arbitration clauses in their contracts. One of the primary reasons is the desire to avoid class actions. Another is the understanding that arbitration can be less expensive, more efficient and quicker than litigating.

However, until businesses are involved in a dispute, they may not realize that the boilerplate arbitration provision in their contracts will not necessarily meet their business goals. In this article, the writers suggest some changes that can better achieve them.

Consider adding a provision that requires claims to be submitted individually, rather than as a class. This is a small change that could make a very big impact if a company finds itself in a dispute.

It should be noted that the U.S. Supreme Court recently granted certiorari in cases that will address a split among the circuits on the issue of whether the National Labor Relations Act prohibits class action waivers in employment arbitration agreements.

A contractual statute of limitation to the arbitration provision may be a good idea. Alternatively, incorporate a particular state’s statute of limitation.

Most companies veer away from providing details in their arbitration provision, but one area where detail may prove useful is establishing the parameters for discovery.

If confidentiality is important to you, include a provision that requires confidentiality of the proceedings and resulting award. The scope of the arbitration provision itself may need to be updated. Consider if an alternative to “all or nothing” better suits your business.