A Word to the Wise

Well, most of us would typically pull from our form files our 'standard' arbitration clause. For example, the American Arbitration Association offers the following 'model' language: 'Any controversy or claim arising out of or relating to this contract, or the breach thereof shall be settled by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.' Is this still a model arbitration clause in our new environment? With this question in mind, a review of the key terms of an agreement to arbitrate an employment dispute seems a worthy endeavor.

Perhaps the key to any well-drafted arbitration clause is a proper definition of the scope of arbitration. The model language above limits arbitration to claims 'arising out of or relating to this contract'. Would a discrimination claim be 'related' to the contract? Perhaps. But then, perhaps not. Compare this language with the language in the agreement at issue in Calamia v. Riversoft, Inc., 2002 WL 31779991 (E.D.N.Y. 12/13/02)(Block, D.J.), where the agreement provided that 'any controversy or dispute arising out of the employment relationship' with the employer would be subject to AAA rules. The court opined that arbitration clauses 'fall into two groups: 'narrow' clauses, which limit arbitration to specific types of disputes, and 'broad' clauses that cover any and all dispute[s]' between the parties. The court concluded that where broad language is used, arbitration of any dispute between the parties is to be presumed in the absence of unambiguous language providing to the contrary. The lesson here is to decide the breadth of the duty to arbitrate before there is a dispute. The 'model' language works well as an example of a reasonably narrow arbitration clause, whereas the language in Calamia serves as a good example of a broad arbitration clause.