Arbitration Agreements In Employment Contracts Template for England and Wales
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What is a Arbitration Agreements In Employment Contracts?
Arbitration Agreements in Employment Contracts in England and Wales are limited by statute. While contractual disputes (bonus, restrictive covenants, confidentiality) can be validly arbitrated, statutory employment rights cannot be removed from the employment tribunal by any pre-dispute clause. A properly drafted clause identifies its scope, is incorporated into the written contract, and expressly preserves all statutory rights to avoid being void under s.288 TULRCA 1992.
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Frequently Asked Questions
Can an employment contract include a binding arbitration clause in England and Wales?
An employment contract can include an arbitration clause for purely contractual disputes, such as bonus calculations or breach of restrictive covenants. However, it cannot remove an employee's right to bring statutory claims before an employment tribunal. The Trade Union and Labour Relations (Consolidation) Act 1992, s.288, voids any term that purports to oust tribunal jurisdiction for statutory rights.
Which statutory employment claims cannot be sent to arbitration?
Claims for unfair dismissal, wrongful dismissal (to the extent they involve statutory rights), redundancy pay, discrimination, whistleblowing detriment, unlawful deduction from wages, and most other claims created by statute must be heard by an employment tribunal. These rights are conferred by parliament and cannot be contracted out of in advance by an arbitration clause, however clearly worded.
Can an employer and employee agree to arbitrate after a dispute has arisen?
Yes. Once a dispute has arisen, the parties can voluntarily agree to refer it to arbitration, including through the ACAS Arbitration Scheme for unfair dismissal claims. A post-dispute agreement to arbitrate is valid because the employee is making an informed decision about an existing known dispute rather than prospectively waiving rights they may not yet fully understand.
What contractual employment disputes can be validly arbitrated?
Disputes that are purely contractual and do not involve statutory rights can be validly referred to arbitration. These include disagreements about commission entitlements, bonus calculation methodologies, contractual garden leave obligations, non-compete and non-solicitation clause interpretation, and breach of confidentiality. These disputes can be referred to arbitration if the clause is properly incorporated.
How should an arbitration clause in an employment contract be incorporated?
The clause should appear in the written employment contract itself, not merely in a handbook or a policy document. The employee should be made aware of it before signing. The clause should identify the arbitral institution, the seat (England and Wales), the governing law, the number of arbitrators, and the categories of dispute it covers. It should expressly exclude statutory claims to avoid ambiguity.
What is a tiered dispute resolution clause and how does it work?
A tiered clause requires the parties to attempt internal resolution at each level before escalating to the next. A typical sequence is informal discussion, then a formal grievance under the ACAS Code, then mediation, then arbitration or tribunal proceedings. Courts and tribunals take the ACAS Code into account when assessing whether procedures were properly followed and may adjust any award if they were not.
Can a senior executive's employment contract include broader arbitration provisions?
Senior executives, particularly those on negotiated service contracts rather than standard employment terms, may agree to arbitrate a broader range of disputes as part of a bespoke arrangement. Even so, statutory rights cannot be contracted away. It is common for senior executive contracts to include wide arbitration clauses that cover all contractual disputes while expressly preserving statutory rights.
What happens if an employee ignores the arbitration clause and brings a tribunal claim?
If the claim is a statutory one, the tribunal will hear it regardless of the arbitration clause, which is void to that extent. If the claim is purely contractual and the clause is valid and incorporated, the employer may apply to the court for a stay under Arbitration Act 1996, s.9. The employment tribunal does not have power to stay its own proceedings for statutory claims on arbitration grounds.
About the Arbitration Agreements In Employment Contracts
Arbitration agreements in employment contracts are legal documents that require you and your employer to resolve workplace disputes through private arbitration rather than traditional court proceedings. These agreements have become increasingly prevalent in U.S. employment relationships as they offer a structured alternative to costly and time-consuming litigation while maintaining legal protections for both parties.
When do you need this document?
You need an arbitration agreement when starting a new job where the employer requires dispute resolution through arbitration, when updating existing employment contracts to include arbitration provisions, or when modifying workplace policies to implement alternative dispute resolution procedures. Many employers in industries such as healthcare, technology, financial services, and retail commonly use these agreements to streamline conflict resolution. You may also encounter these agreements during merger and acquisition activities where employment terms are being standardized, or when companies are updating their legal compliance frameworks following recent legislative changes.
Key legal considerations
Your arbitration agreement must clearly define the scope of covered disputes while ensuring you don't waive substantive legal rights protected under federal employment laws. The agreement should specify arbitration procedures, including arbitrator selection methods, discovery rules, and hearing processes that provide fair resolution opportunities. Cost allocation provisions are critical—employers typically must bear arbitration fees that exceed normal court filing costs to prevent the agreement from being unconscionable. You should ensure the agreement includes carve-outs for certain claims such as workers' compensation, unemployment benefits, and injunctive relief that are better suited for court resolution. The document must also comply with recent restrictions on forced arbitration for sexual assault and harassment claims under federal law.
Legal requirements in United States
Under the Federal Arbitration Act, your arbitration agreement must be in writing and involve interstate commerce to be federally enforceable, with federal law generally preempting conflicting state arbitration laws. The agreement must comply with Title VII requirements ensuring you retain rights to file discrimination charges with the EEOC, even when agreeing to arbitrate subsequent lawsuits. NLRA compliance requires careful drafting of class action waiver provisions to avoid interfering with your rights to engage in concerted activity for mutual aid and protection. Age discrimination claims under the ADEA require specific procedural protections including adequate time periods for consideration and revocation of arbitration agreements. State-specific requirements may impose additional procedural safeguards, unconscionability standards, and disclosure requirements that must be incorporated into your agreement. Recent federal legislation prohibits forced arbitration of sexual assault and harassment claims, requiring these disputes to remain available for court resolution regardless of prior arbitration agreements.
GOVERNING LAW
Applicable law
This Arbitration Agreements In Employment Contracts is drafted to comply with England and Wales law. Key legislation includes:
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