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Employment Blog

Arbitration Clauses and the Impact of Their Terms

Authored by Ruder Ware Attorneys
Posted on May 27, 2015
Filed under Employment

The Wisconsin Supreme Court recently addressed the authority of circuit courts to assess and adjudge arbitration matters. In First Weber Group, Inc. v. Synergy Real Estate Group, LLC, 2015 WI 34 (March 24, 2015) determinations and rulings regarding multiple issues were made. In pertinent part, the parties ultimately disputed over an arbitration clause of their contract that stipulated requests for arbitration must be filed within a set number of days. First Weber’s request for arbitration in this matter was well beyond the deadline and as such, Synergy Real Estate refused arbitration. First Weber subsequently filed a lawsuit in an effort to force Synergy Real Estate into arbitration. 

The circuit court found in favor of Synergy Real Estate, holding that the request to arbitrate was untimely. The court of appeals affirmed. The Supreme Court reversed finding that the timeliness issue, or procedural arbitrability, is to be determined in the arbitration proceeding, not by a court or a proceeding to compel arbitration.

The Court stated that procedural arbitrability differs from substantive arbitrability, which pertains directly to the determination of whether the parties’ dispute is subject to arbitration:  “In an action to compel arbitration, a court’s role is generally limited to determining the question of substantive arbitrability, unless the parties specifically agreed otherwise…Issues of procedural arbitrability are to be resolved during arbitration, rather than by a court.” The Court based its decision on Wisconsin’s public policy favoring arbitration as “a swift and inexpensive process that is guided by a contractual agreement” as opposed to the formality and expense that go along with a lawsuit and the courts. Further, the Court found that even when a court gets involved in an issue of substantive arbitrability, “it must exercise great caution. [A] court has no business weighing the merits of the grievance. It is the arbitrator’s decision for which the parties bargained.”

Maintaining a comprehensive understanding of arbitration is essential; employers should also review the terms and verbiage related to any arbitration provision to be prepared for arbitration. The grievance procedure typically begins with determination of eligibility for arbitration, per the terms of a specific contract. The terms or clauses of an agreement should clearly set structured time limits for filing a grievance and for each subsequent step so that disputes do not languish or “resurrect” themselves long after they have been seemingly resolved. Careful observance with respect to time limits and filing deadlines is certainly a worthwhile best practice. Failure to meet contracted deadlines pertaining to any dispute resolution action may result in a delay of resolution. Further, language in provisions regarding the scope of what can be grieved, or arbitrated, can be bargained during contract negotiations. However, care is needed so as not to give up management rights or inadvertently partake in negotiations over prohibited subjects of bargaining. 

Arbitration clauses and the terms within these clauses cover a myriad of issues and thoughtful evaluation should be used when adding to, subtracting from, or leaving in place, the terms of such provisions. Resolution of arbitration disputes can be time intensive and complex. Proactive steps should be taken to ensure arbitration clauses are clear and well defined.