When most individuals think about solving a legal dispute, they picture going to court and a trial process. However, many individuals are now turning to other options to solve their issues using alternative dispute resolution, or ADR.

ADR includes different methods, is less expensive in many cases, and settles conflicts in a more private setting. It is also often faster than a trial.

ADR can be used when both sides of a dispute agree to do so or, in some cases, it is built into a contract as the course of dispute resolution which must be used. One of the more well-known ADR choices is arbitration.

Arbitration is a process where both sides agree to have their legal dispute heard by a neutral third person, called an arbitrator. An arbitrator hears the evidence which is presented and then comes to a binding decision.

After the arbitrator hears the arguments of the parties, they make a decision regarding the claims, called an arbitration award. It is important to note that there are certain disputes which cannot be arbitrated because state or federal laws require litigation of certain matters.

There are also certain disputes which must be submitted to arbitration because the parties entered into an agreement which requires the use of arbitration. The terms of required arbitrations are detailed in the agreement provisions.

These provisions are referred to as mandatory arbitration clauses. These clauses typically require that the party who is seeking to resolve the dispute must try to resolve it through arbitration first.

Certain agreements, such as employment agreements, often contain language which requires that any dispute must be arbitrated.

How Does Arbitration Work?

Although arbitration is not structured in the same way as litigation, it is a more formal process than mediation or negotiation. The parties to an arbitration schedule an appointment with an arbitrator who reviews the evidence presented, listens to the arguments of each side, and makes a decision regarding the issue or issues that the parties need resolved.

The decisions of arbitrators may be either non-binding or binding, the majority of which are now recognised as binding. The majority of arbitration rules arise from contract language.

This typically occurs when the clause provides that any disputes regarding anything which is covered by the contract will be decided by an arbitrator and that decision will be binding on both parties.

What Happens at the Arbitration Hearing?

At an arbitration hearing, each party is permitted to present evidence which is relevant to the issue in dispute. Opening statements may be presented, but they are typically waived because arbitration briefs are submitted prior to the hearing.

Witnesses, including expert witnesses, may be examined and cross-examined. Evidence and documents are submitted related to the claims. In addition, closing arguments may be presented by the parties.

Is the Conflict Resolved at the Arbitration Hearing?

Typically, once the parties submit their evidence to the arbitrator, the matter is then taken under advisement. This means that the arbitrator will take time to consider all of the evidence which is presented.

After careful consideration, the arbitrator will issue an award to the party who has the stronger case. Following the issuance of an arbitration award, the prevailing party is able to have the award issued as an enforceable order from a court of law.

Unless the parties have agreed to a non-binding arbitration, an award cannot be reviewed by a court. In addition, the parties cannot appeal the decision of an arbitrator.

How Does Arbitration Differ From Litigation?

Arbitration and litigation differ in a number of ways. Generally, arbitration is less expensive for the parties.

Disputes in arbitration are often resolved more quickly than disputes which go to trial, even when the parties are represented by attorneys. The process of formal discovery is also often relaxed during arbitration proceedings.

In addition, the rules of evidence are also often more relaxed than in litigation. For example, evidence which would not be admissible at trial, such as certain hearsay evidence, may be used in arbitration.

What is an Arbitration Agreement?

Arbitration agreements are signed by employees and include a clause which requires them to settle disputes outside of a court of law using arbitration. As noted above, arbitration is a process in which the two parties bring their dispute to an arbitrator who issues a decision. Depending on the terms of the arbitration agreement, the decision may be final.

What Are the Advantages of Arbitration?

Arbitration may be beneficial to both employers and employees. Some of the main advantages include:

  • Quick resolution because arbitration disputes are settled much quicker than court trials; and
  • Less expensive because arbitration is generally cheaper than a trial.

What Are the Disadvantages of Arbitration?

Although arbitration may be more convenient and quicker than trial, it also has disadvantages, including:

  • Arbitration is decided by a single individual, often by a retired judge, instead of a jury. Juries are often more sympathetic towards employees;
  • Arbitration often cannot be appealed. Once the third party arbitrator issues their decision, the parties may be bound by it; and
  • Arbitration limits the amount of evidence each party can get from the other side. This puts the employee at a disadvantage because their employer already has access to all the employee’s files and documents.

Can I Refuse to Sign an Arbitration Agreement?

An employee may refuse to sign an arbitration agreement, but it may be risky. An employer typically has the right to rescind a job offer if an individual refuses to sign the arbitration agreement.

A potential employee may be better off negotiating with their employer for different terms. In addition, an employee should review any employment contracts prior to signing them.

In some cases, a potential employee may overlook an arbitration clause in their employment agreement if it is in the fine print, appears at the end of the document, or is difficult to locate. It is also helpful to have an attorney review and employment contracts prior to signing.

If an individual signs an arbitration agreement with their employer, they may still be able to file a lawsuit if they have a dispute. This may be possible if they file a claim with a government agency, such as the EEOC.

This type of agency may be able to file a claim on behalf of the employee, which would enable them to obtain compensation for their losses.

Are All Arbitration Clauses Legal?

So long as an arbitration agreement does not deprive an individual of their rights, it is typically considered legal. In some cases, however, the terms of an arbitration agreement may be so unfair they are considered illegal, such as agreements where the terms include:

  • Agreements that bind only the employee and not the employer. These agreements make it so that your employer can sue the employee, but the employee can not sue their employer;
  • Agreements which only provide the employer with the right to choose the arbiter;
  • Agreements which require the employee to travel a great distance to pursue arbitration. For example, it is probably not legal to force an employee to arbitrate at company headquarters in Switzerland; and
  • Agreements that force an employee to forfeit their rights to certain remedies such as punitive damages or emotional distress.

Should I Get a Lawyer if I Have a Problem with an Arbitration Agreement?

It is essential to have the assistance of a contract lawyer for any issues, questions, or concerns you may have related to an arbitration agreement. It is important to have your attorney review your employment contract prior to signing.

If you have already signed your employment agreement, your attorney will be able to advise you regarding whether or not it is enforceable. If you do enter into the arbitration process, your attorney will be able to represent you and ensure your rights are protected.