Arbitration Agreement In Employee Handbook Template for England and Wales

Employee handbooks in England and Wales can include arbitration clauses for contractual disputes, but such clauses cannot remove an employee's right to bring statutory claims (such as unfair dismissal or discrimination) before an employment tribunal. Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992 voids any term that purports to oust employment tribunal jurisdiction for statutory claims.

Purely contractual disputes, such as arguments over bonus entitlements, commission calculations, and restrictive covenant enforceability, can validly be referred to arbitration by agreement. Statutory claims for unfair dismissal, discrimination, whistleblowing detriment, and unlawful deduction from wages must generally be heard by an employment tribunal, which is a public forum with exclusive statutory jurisdiction.

An arbitration clause in an employee handbook will only bind an employee if it has been expressly incorporated into their individual contract of employment. Handbook terms are not automatically contractual. The clause must be clearly signposted as contractual in the handbook itself or in the employment contract, and the employee should be made aware of it before or at the time they accept the role.

The ACAS Arbitration Scheme is a voluntary, confidential alternative to the employment tribunal for unfair dismissal and flexible working claims. Both employer and employee must agree to use it after the dispute has arisen; a pre-dispute clause in a handbook cannot compel an employee to use it. The scheme produces a binding award that cannot be appealed on points of law.

Pre-dispute arbitration clauses are rare in English employment contracts because of the statutory protections that limit their scope. They are more commonly seen in senior executive contracts for purely contractual disputes. Employers sometimes use tiered dispute resolution clauses that require internal grievance procedures and mediation before any external arbitration or tribunal claim can be brought.

Where the tribunal claim is based on a statutory right, the arbitration clause will not prevent the tribunal from hearing it, regardless of the handbook wording. Where the claim is purely contractual and the clause is incorporated into the contract, the employer may apply to stay any court proceedings under Arbitration Act 1996, s.9, but employment tribunal jurisdiction for statutory claims cannot be removed.

The clause should be expressly incorporated into the employment contract, specify the arbitral institution or appointment mechanism, state the seat of arbitration (England and Wales), confirm the governing law, and identify the categories of dispute it covers. It should make clear that it does not apply to statutory employment claims. A confidentiality provision is often included to protect both parties.

Signing a handbook does not waive statutory employment tribunal rights, as those rights are protected by statute and cannot be contracted out of in advance. Even a clearly drafted and separately acknowledged arbitration clause cannot prevent an employee from bringing statutory claims before the tribunal. Waiver of tribunal rights is only possible post-dispute and in limited circumstances, such as a COT3 settlement through ACAS.