By Nina Abboud.

Given the length, formality, and cost of litigation, employers are turning to arbitration to resolve disputes. Arbitration is a private process with a neutral third party as the decision maker. Employees also find the process advantageous, as it provides a more accessible way to address issues with an employer.

In order to resolve a dispute through arbitration, the parties must be subject to an arbitration agreement. Below is a general overview of Michigan employment arbitration agreements, should you or your business require resolution of a dispute through arbitration:

Scope of Arbitration Agreements

When interpreting an arbitration agreement, the same legal principles that govern contract interpretation apply. Therefore, it is important that the language of the agreement represents intent of the parties.

Determining the Applicable Law

Arbitration agreements are enforceable under Federal Arbitration Act or the Michigan Uniform Arbitration Act.

Arbitrations are administered through organizations such as the American Arbitration Association (“AAA”) or JAMS, which also have its own rules and procedures.

Who Enforces Employment Arbitration Agreements?

The subject of the dispute determines who will decide the issue. Substantive issues–such as whether an agreement exists, and issues that go to the drafting of the contract–are generally questions for the court. Procedural issues, on the other hand, are generally questions for the arbitrator.

Keep in mind that if arbitrating according to the AAA Commercial Arbitration Rules, the arbitrator may make the initial determination of substantive issues.

When Dealing with Enforcement Issues, Who Carries the Burden?

According to Michigan law, the burden is on the party seeking to avoid the arbitration agreement, not the party seeking to enforce the agreement.

Who Can Be Required to Arbitrate?

As a general rule, a party cannot be required to arbitrate an issue which he/she has not agreed to submit to arbitration. Additionally, a party cannot be required to arbitrate when not legally or factually a party to the agreement.

However, since arbitration is a matter of contract, Michigan Courts recognize five contract principles that bind a nonparty to an arbitration agreement:

  • Incorporation by reference
  • Assumption
  • Agency
  • Veil-piercing/alter-ego
  • Estoppel

Continued Employment as Acceptance of Arbitration Agreement

If an employer changes an arbitration provision in the employee’s employment contract or incorporates new dispute resolution process, it is no longer enough to rely on the employee’s continued employment as acceptance of the changes. The employee must know that their continued employment manifests acceptance.

If you would like help navigating Michigan employment arbitration agreements, our team is happy to assist. Send us a message now.