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Does An Arbitration Clause Survive The “For Cause” Termination Of An Employment Agreement?

BusinessLit

Business contracts often contain detailed procedures for addressing alleged breaches of either party’s obligations. Such procedures may include a requirement to submit any unresolved dispute to binding arbitration. Such arbitration clauses are often controversial, with an aggrieved party frequently going to court anyway to argue the clause is illegal for some reason.

For example, the Florida Fourth District Court of Appeals recently addressed a case, Florida Woman Care LLC v. Nguyen where a plaintiff challenging an arbitration clause in her employment agreement should not be enforced because the termination of her employment also absolved her of the duty to arbitrate. The courts disagreed and held that the arbitration clause remained valid.

Here is what happened. The plaintiff, a doctor, signed an employment agreement with the defendant, a medical practice in which she held a membership interest. The agreement provided that if the defendant terminated the plaintiff’s employment within three years, she would also forefeet her membership interest.

About one year into the agreement, the defendant terminated the plaintiff “for cause.” The plaintiff subsequently filed a lawsuit for breach of contract. The crux of her claim was that the defendant did not follow the procedures spelled out in the agreement before terminating her employment.

The defense moved to compel arbitration of the plaintiff’s claims, citing another clause in the agreement that applied to “any controversy or claim arising out of or related to this Agreement, or any breach thereof.” In response, the plaintiff argued that the arbitration clause “did not survive the termination of the agreement.” After considering this and other arguments, a Florida trial court actually declined to compel arbitration.

But on appeal, the Fourth District reversed, holding that the arbitration clause did in fact survive the termination of the plaintiff’s employment. The plaintiff’s argument largely centered on a “survival clause” in the agreement that expressly stated certain other provisions, which dealt with the disclosure of confidential information, would survive termination. The arbitration clause was not one of the listed provisions. That did not matter, the Fourth District said, because the arbitration clause was “procedural” in nature. It was akin to a contractual provision specifying the choice of forum to resolve a dispute. As such, unless the agreement expressly stated that the arbitration clause did not survive termination, the law presumed that it did. Indeed, the Fourth District concluded, arbitration was generally “needed when disputes on termination or breach of contract occur.”

Speak with a Sarasota Breach of Contract Attorney Today

Many people are quick to litigate a breach of contract before taking the time to understand what the contract itself actually provides. This is why it is essential to work with an experienced Bradenton business litigation lawyer who can sit down and review the facts of your situation before advising you on the best course of action moving forward. Contact the offices of Moran, Sanchy & Associates today to schedule a consultation with a member of our business and civil litigation team.

Source:

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