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DOES YOUR CONTRACT CONTAIN A VALID AGREEMENT TO ARBITRATE?

  • Arbitration
  • Stearns, Roberts & Guttentag, LLC
  • No Comments
  • May 8, 2017

DOES YOUR CONTRACT CONTAIN A VALID AGREEMENT TO ARBITRATE?

By: Richard E. Guttentag, Esq., Stearns, Roberts & Guttentag, LLC

In determining a party’s entitlement to arbitration, courts consider three elements: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.  The first element of whether a valid written agreement to arbitrate exists was at issue in the case of Spicer v. Tenet Florida Physician Services, LLC, 2014 WL 5343503 (Fla. 4th DCA October 22, 2014).

In Spicer v. Tenet Florida Physician Services, LLC, an Employee signed an employment agreement with Employer. The last paragraph of the employment agreement provided in pertinent part:

As a condition of employment, you agree that any and all disputes regarding your employment with, including disputes relating to the termination of your employment are subject to Employer’s Fair Treatment Process, which includes final and binding arbitration.  You also agree to submit any such disputes for resolution under that process, and you further agree to abide by and accept the decision of the arbitrator as the final and binding decision and exclusive resolution of any such disputes.

The “Fair Treatment Process” (“FTP”) was not attached to the employment agreement, and there were no directions in the agreement describing how an employee could obtain a copy of or locate the FTP.  A couple of weeks after hiring Employee, the Employee was given directions to access a web site where the FTP was posted.  The FTP states that arbitration would be administered by the American Arbitration Association and sets forth the allocation of arbitration costs.

Subsequent to Employee’s hiring, Employee sued Employer for allegedly violating Florida’s Whistleblower Act.  Employer successfully argued at the trial court level that the case should be dismissed and referred to arbitration, and the Employee appealed.

The main issue addressed on appeal was whether a valid arbitration agreement existed between Employee and Employer.  Employee raised two arguments in asserting there was no binding arbitration agreement. First, Employee argued that the Employment Agreement did not contain an adequate arbitration agreement. Second, Employee argued that the FTP, which did state an adequate arbitration agreement, was not sufficiently incorporated into the Employment Agreement.

Provisions in a contract providing for arbitration must be definite enough so that the parties have some idea as to what particular matters are to be submitted to arbitration and to set forth some procedures by which arbitration is to be effected.  The court held that the Employment Agreement, standing alone, was not sufficient to create a valid arbitration agreement because although the agreement included language about arbitration, the agreement did not set forth any procedures for arbitration.

The appellate court also held that the FTP was not adequately incorporated into the Employment Agreement.  In order to incorporate a separate document into a contract, the document must be sufficiently described or referred to so that the intent of both parties may be ascertained.  A reference to a separate document must either describe the document in detail, or describe where the document can be found.  Further, a separate document cannot be incorporated into a contract if the document is not available during the negotiation of the contract.  In this case, the Employer failed to provide Employee with a copy of the FTP or describe where Employee could find a copy of it during the negotiations process.  Therefore, the appellate court concluded that the FTP was not sufficiently incorporated into the Employment Agreement.

Accordingly, because the Employment Agreement, standing alone, did not contain a legally sufficient agreement to arbitrate, and the Employment Agreement did not sufficiently incorporate by reference the Fair Treatment Process, the appellate court held that the was no binding agreement to arbitrate between Employee and Employer, and reversed the trial court’s decision.

This case demonstrates that the first element a party must establish in order to compel arbitration of a dispute is the existence of a valid written agreement to arbitrate between the parties.  In order to have a valid written agreement to arbitrate, the language in the agreement providing for arbitration must be definite enough so that the parties have some idea as to what particular matters are to be submitted to arbitration and set forth some procedures by which arbitration is to be effected, or the agreement must adequately incorporate by reference a separate document which contains a legally valid agreement to arbitrate.

About the Authors: Richard E. Guttentag is a partner with Stearns, Roberts & Guttentag, LLC, and is Board Certified in Construction Law by the Florida Bar. Mr. Guttentag exclusively in construction law including construction lien claims and defense, payment and performance bond claims and defense, bid protests, construction contract preparation and negotiation, and construction and design defect claims and defense. He can be reached for consultation at reg@stearnsroberts.com.