Whenever I’m asked to review an employment agreement or contract there are three initial provisions I look for:
- The Venue Provision: If there is a dispute over the agreement does it specify where any lawsuit must be filed(City/County/State)? Does it specify state or federal court?
- Arbitration Provision: Does the agreement require arbitration? Is it governed by AAA rules? How many arbitrators are required? Is there a deadline to demand arbitration? Is there a loser pays provision?
- Waiver – Is there a jury trial waiver? These are enforceable in Texas if certain requirements are met, but not all states.
There are of course others, but these provisions define the playing field. A venue provision may require a litigant to hire a lawyer they wouldn’t normally use in another state. It also might require them to travel. These things factor into the cost of defending or prosecuting a lawsuit. In addition to venue, a choice of law provision is always good to have. As seen here, non-compete agreements are sometimes easier to enforce in certain states as opposed to others. Does the non-compete agreement specify choice of law? Arbitration and jury trial waivers eliminate the risk of a runaway jury. However, the cost of arbitrations continue to rise and an arbitration is not always "cheaper" then a standard lawsuit. Make sure these issues are taken into consideration before signing or drafting any agreement.