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Suppose an employee is hired by a firm for a period of one year. After the first year the employee may continue working for the company, until terminated, as an at will employee (For simplicity, let’s assume the contract explicitly contains a starting and ending date so there is no ambiguity as to the expiration of the contract).

The contract also specifies under what circumstances the employee maybe terminated and a specific protocol the company must follow to terminate the employee (for example, giving a certain number of days advance notice). Contract also contains a binding arbitration provision.

Suppose the employee continues working for the firm for another 3 years after the initial one year term ends.

After four years, the firm fires the employee. The employee argues that the company did not follow the termination protocol outlined in the contract and wishes to compel arbitration whereas the firm wishes to litigate the case in court.

The firm argues that it is no longer bound to arbitration since the contract (which contains the arbitration clause) was only binding during the first year and has thus expired.

Although the employee agrees that the contract expired in a general sense he argues that the part of the contract that governs how the employee must be terminated is still governed by the contract. Although the employee acknowledges that the general agreement to arbitrate no longer exists (for example, if the employee sustains an injury on the job after the first year the employee would agree that the firm is not bound to arbitration) since the termination protocol clearly arise from the contract, the employee argues, the firm is still bound to arbitrate this specific dispute.

What case precedent can be applied to this case (especially in NJ)?

Is a firm required to arbitrate disputes arising after a contract expires if the contract specifically contains provisions that govern the phase of the employment after it expires?

Note: The above scenario hypothetical. It is only intended to help illustrate the essence of the question.

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  • I think we would need to see the exact wording of the contract to determine if it has expired or not, and whether the arbitration clause applies outside the initial one year period or not. 2 days ago
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    I also observe that somebody is asking a lot of questions about arbitration in relation to employment law in New Jersey. The question as it stands is not asking for legal advice, (so is not off topic), but if this is actually about you, you need your own, paid for, lawyer 2 days ago

2 Answers 2

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Terms of a contract die with it

Unless there is a specific statement that particular terms survive termination of the contract.

In your circumstances, arbitration could be used for a dispute under the original contract for things that happened while it was enforced. For things that happened under what appears to be a different contract, unless the arbitration term explicitly survives termination, it doesn’t.

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  • Are you suggesting that it is not possible for a contract to contain a individual provision that survives the expiration of the contract if the contract does not explicitly contain a survivability clause? What if the specific provision is only relevant after the contract expires? What is the proof that the provision would not survive contract expiration when there is an implicit understanding that it should?
    – S.O.S
    Nov 25 at 16:25
  • Assuming the provision does survive the expiration of the contract, the question is whether this automatically binds them to arbitrate the dispute as well or one could argue that the arbitration definitely expired.
    – S.O.S
    Nov 25 at 16:26
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    @S.O.S it depends on the scope of the arbitration clause. If it’s for “disputes under the contract” then no. If it’s for “disputes arising from the contract” then maybe; the argument could be made that the subsequent contract “arose from” the original.
    – Dale M
    Nov 25 at 20:02
  • The contract only states that all disputes between parties must be decided by arbitration.. presumably, the employer and employee are still considered "parties" after the first year but I don't know for sure..
    – S.O.S
    Nov 26 at 23:13
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Is a firm required to arbitrate disputes arising after the expiration of employment contract?

The wording of this question is problematic. From your description it is doubtful that the contract truly expired at the end of the first year. It is valid for a contract to encompass multiple phases with different provisions specific to each phase.

Providing that "[a]fter the first year the employee may continue working for the company, until terminated, as an at will employee" is different from expiration of the contract at the end of the first year. The contract simply outlined what happens before and after that point in time. The employer's allegation that the contract expired at the end of the first year is inconsistent with outlining in that same contract the nature of the parties' continued relation after the first year. Said nature of the employment relation should have been outlined in a separate contract in order to preempt an interpretation of there being one same/ongoing contract.

The employer's allegation is vague and untenable also in a scenario where the employer terminates the employee within the first year. The employer's allegation seemingly implies that the employee's deadline for arbitration proceedings expires at the end of the first year. That would give the employer the opportunity to evade the arbitration clause by choosing a timing that de facto prevents its employee from enforcing the clause.

Questions regarding arbitration are unanswerable without knowing the exact terms of the relevant clause(s). Just like the contract provides a transition from fixed term employment to at will employment, it is possible --but not necessarily the case-- that the arbitration provision is applicable only to some of the phases that the contract encompasses.

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  • The contract only states that all disputes between parties must be decided by arbitration.. presumably, the employer and employee are still considered "parties" after the first year but I don't know for sure..
    – S.O.S
    Nov 26 at 23:12
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    @S.O.S "presumably, the employer and employee are still considered "parties" after the first year". They certainly are. As explained in the answer, the contract contains at least one provision that becomes active at completion of the first year: the transition to at will employment. In other words, the terms of the contract encompass more than just the first year. Nov 27 at 12:25

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