Is Continued Employment Sufficient Consideration For An Arbitration Agreement?

Yes – in Minnesota, continued employment is sufficient consideration to support a mandatory arbitration agreement between an employer and employee.

The general rule in Minnesota is that when a change in the employment relationship is proposed to an employee, the employee’s retention of employment constitutes acceptance of the offer.  By continuing to stay on the job, although free to leave, the employee supplies the necessary consideration for the offer.  Courts in Minnesota have held that this rule applies to agreements to arbitrate.  See Lang v. Burlington Northern Railroad Co., 835 F. Supp. 1104 (D. Minn. 1993); see also Chiafos v. Restaurant Depot, LLC, 2009 WL 2778077 (D. Minn. 2009).

The one exception to this rule is for restrictive covenants, like non-compete agreements.  Under Minnesota law, continued employment alone is not sufficient consideration for a non-compete agreement.  Instead, a non-compete agreement must either be signed at the beginning of the employment relationship, as a condition of employment, or it must be supported by independent, bargained-for consideration.  See Nott Company v. Eberhardt, Nos. A13-1061, A13-1390 (Minn. Ct. App., June 4, 2014).  But this rule does not apply to arbitration agreements.

Takeaway:  Under Minnesota law, continued employment is sufficient consideration for an arbitration agreement.  It’s important to note, however, that courts in some other states disagree on this point.  Multi-state employers need to check the law of each state in which they do business to ensure their arbitration agreements are enforceable.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on August 25, 2014, in Employment Policies and Agreements and tagged . Bookmark the permalink. Leave a comment.

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