A former employee can be compelled under an arbitration agreement signed at the time of hire to arbitrate claims arising after the worker’s employment has ended, a California appeals court has ruled. We’ll explain the new ruling and provide drafting pointers that can help you use this decision to your advantage.
Employment Relationship Goes South
Carl Buckhorn, a physician for the St. Jude Heritage Medical Group in Orange County, signed a 45-page employment agreement with the medical group. The contract contained a mandatory arbitration clause covering disputes arising between the parties “concerning enforcement or interpretation” of the employment agreement.
Before long, the employment relationship deteriorated, and Buckhorn was terminated. The medical group then sent a letter to Buckhorn’s patients, stating that he was no longer with the medical group and offering to direct patients to other medical group doctors. Some patients were allegedly told that Buckhorn left the group because he had marital and mental problems, lost insurance coverage, was no longer practicing medicine, or had “just disappeared.”
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Doctor Sues, Medical Group Seeks Arbitration
Buckhorn sued the medical group for wrongful termination, defamation, and interference with prospective economic advantage.
Relying on the arbitration clause in Buckhorn’s employment contract, the medical group asked the court to send the case to an arbitrator. Buckhorn replied that the arbitration clause didn’t cover his defamation or interference with prospective economic advantage claims because they were tort—that is, noncontract—claims and were based on damage to his reputation occurring after his termination.
Noncontract Claims Must Be Arbitrated
But a California court of appeals has ruled that Buckhorn was required to arbitrate his contract and tort claims. Tort claims that are “rooted” in the employment relationship created by the employment contract are covered by the contract’s requirement to arbitrate, even if the conduct that is the basis of the tort claim occurred after the employment contract was terminated, the court said. For example, Buckhorn’s tort claim for interference with prospective economic advantage was based on his expectation of future income from his patients. But because those patients consulted him in his capacity as a medical group employee, it was necessary to resort to the employment agreement to determine the extent of any economic interest.
The court also pointed to previous court decisions holding that language requiring arbitration for disputes regarding the meaning, interpretation, or enforcement of the employment contract was broad enough to cover related noncontract claims.
Drafting Tip
This case demonstrates the im-portance of ensuring that arbitration provisions are broadly worded to cover a wide range of claims. Be sure to state that the agreement requires arbitration of any and all disputes concerning the meaning, enforcement, or interpretation of any provisions of the employment contract.