5 Things Your Arbitration Clause Must Have

In my never ending obsession with arbitration clauses, the Michigan Court of Appeals added more fodder in the recent case of Shaya vs City of Hamtramck.

In this case, the Court of Appeals, again, interpreted the Michigan Arbitration Act (MAA). This act succinctly states that the parties can agree to arbitrated dispute if: (1) the parties have agreed to arbitrate the claims in a valid binding contract; (2) the MAA or other statutes do not specifically prohibit arbitration; and (3) the arbitration agreement does not waive substantive rights and remedies of the applicable statute and the arbitration procedures are fair to the employee. This last clause is the one most frequently litigated.

In this case, the court reviewed the five elements of “the substantive rights and remedies”. These are: (1) clear notice that the employee is waiving his right to have his discrimination claims tried in court and is opting to arbitrate instead; (2) the employee has a right to representation by counsel; (3) there is a neutral arbitrator; (4) the parties have a right to reasonable discovery including depositions; and (5) the arbitration hearing is fair to all parties.

Here, because the City of Hamtramck’s arbitration clause DID NOT state that the employee was waiving his rights to have his discrimination claims heard in court, the arbitration provision was struck down.

The moral of the case: if you’re going to have an arbitration clause (which, as many of you know I am not a fan of) make sure that you clearly state that each party is waiving their rights to have the case heard in court.

Questions on this case?  Call me 248-455-6500 and or email me agoldberg@confidenceandclarity.com, and we can talk.

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