As legal costs continue to rise thanks to a clogged court system and a litigious society, more companies are putting arbitration agreements in their contracts.
There are advantages and disadvantages to arbitration, and you’ll need a lawyer to help you get the arbitration agreement in place. But before deciding whether to include an arbitration clause in your contracts, consider the following.
Advantages
* Cost savings. Arbitration offers a substantial reduction of litigation costs to all parties, particularly in attorneys’ fees.
* Speed. Arbitration substantially reduces the amount of time consumed by pre-trial maneuvering. A case that might normally take years can often be concluded in months.
* Reduced emotional costs. The speed and informality of the process, along with a less-confrontational discovery process, minimizes emotional strain and allows the parties to quickly get on with their lives and business.
* Confidentiality. Unlike court cases, arbitration proceedings are not public. The case will not be tried in the newspaper.
* Quality of the decision. Arbitrators knowledgeable in employment law may render more rational and predictable decisions than juries, which may be swayed by emotion.
Disadvantages
* Limited appeal rights. By law, arbitrators’ decisions are meant to be final, and can be appealed only on limited grounds.
* More frequent utilization. Employees can more easily challenge personnel decisions if arbitration is part of your employment agreement. Employers should accept the possibility of increased challenges as a tradeoff to the far greater cost savings which arbitration offers.
Arbitration is most often used to settle contractual or commercial disputes.
If the underlying agreement provides for arbitration, one of the parties to the contract must file a request for arbitration and pay the required fee to a group that provides arbitration services.
The arbitration service will suggest an arbitrator or arbitrators, which the parties must agree on. The arbitrator may be an attorney, judge, CPA or businessperson.
After the parties have defined their dispute, there will be a hearing, often in the arbitrator’s office, at which the parties present evidence and witnesses without the formal rules of evidence used in court litigation. After the evidence is presented, the arbitrator reaches a decision and later sends the parties a written opinion.
With a few narrow exceptions, such as in the case of fraud by the arbitrator, there is no way to appeal an arbitrator’s decision.
As with litigated judgments, and unlike with mediated settlements, an arbitration order can be enforced in court under laws that allow an arbitration decision to be entered in the court system and then become a judgment. The prevailing party can collect on the arbitration order using all available legal collection methods, such as levies on property. Source: American Bar Association
