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North Carolina Appellate Court Refuses to Apply Limited Arbitration Clause to Tort Claims Related to Termination

    Client Alerts
  • August 03, 2012

Many employers favor the use of mandatory arbitration agreements with employees that are intended to prevent disputes from going to trial. While such agreements are generally enforceable in North Carolina, a new decision from the state Court of Appeals warns employers that restrictions in the arbitration language will be strictly interpreted against them.

In Fontana v. Southeast Anesthesiology Consultants, P.A., the plaintiff was a physician who challenged his termination by the practice. In addition to his breach of contract claim, he alleged a variety of related tort actions, including misrepresentation, fraud, conspiracy, unfair trade practices and claims related to an oral partnership promise. The defendant moved to compel arbitration, pointing to a mandatory arbitration provision in the plaintiff's employment contract.

The arbitration language stated that any dispute relating to the physician's termination would be subject to mandatory arbitration. The plaintiff contended that his ancillary tort claims were not based on the termination, and should be allowed to proceed in court. The employer countered that all of the plaintiff's claims related to his termination, and allegedly contributed to the environment that led to the termination decision.

The Court of Appeals sided with the plaintiff, affirming denial of the motion to compel arbitration on all claims in the lawsuit. While acknowledging the legal preference shown to arbitration agreements, the court noted that the actual arbitration language is still subject to normal contract construction rules. The employer limited the arbitration agreement to disputes over termination, and the clause is therefore limited to the actual breach of employment contract claims.

Employers choosing to use mandatory arbitration agreements should review them to make sure they cover all intended claims. If the parties want the agreement to apply to all claims arising out of the employment relationship, this should be explicitly included in the arbitration clause language.