Protect Your Dealerships with Employment Contracts that Contain Arbitration Clauses

• By: Guest Blogger
• On: 04/29/2020 12:22:42
• In: Texas Posts
• Comments: 0

Steve Levine, Attorney, Ignite Consulting Partners

In my first blog, I examined some errors that I've seen in arbitration agreements that may render them unenforceable.  In this second part, I want to call attention to the opportunity for dealers to further protect themselves from risk by using arbitration agreements in Employment Contracts.  

I find that dealers don't very often consider the risks presented by their own personnel.  That's a mistake, because in the last decade or so there has been a significant increase in lawsuits brought by employees against employers.  

The employment relationship has many potential pitfalls that can give rise to litigation, such as classification of an employee as exempt or non-exempt, calculation of pay, denial of benefits, calculation of overtime pay, wrongful discharge, all sorts of harassment claims, and so on.  The fact that Texas is an “at will” state doesn't mean that these dangers should be overlooked.  All too often, though, I've observed dealers/employers neglect these risks by failing to have a robust employment manual and policies.

The employment manual or handbook is crucial to building a defensible position, and as part of the relationship the employer should strongly consider the use of an arbitration clause to remove the danger of class action and an unfavorable jury.  Think about it, a jury in just about any civil case will be made up of mostly folks that are employees themselves, and they may be more likely lean to the side of the employee.  Also, many dealer actions, such as employee classification and calculation of pay are by their very nature the type of activity that could give rise to a class action claim.  

The brutal truth is that the interests of employees and the employer may not always be aligned.  It's important that dealers contemplate this danger at the start of the employment relationship, and a well written arbitration clause can go a long way to protecting the dealer.