More and more employers are asking employees to sign arbitration agreements as a condition of employment.
Below, we explain the benefits and drawbacks of these agreements for both employers and employees.
What is arbitration?
Arbitration is a means of resolving legal disputes outside of court. Parties present their case to a neutral third party, called an arbitrator. After a hearing, the arbitrator makes a ruling, which may or may not be binding, depending on the terms of the arbitration agreement.
Benefits of arbitration
One primary benefit of arbitration is that it can be faster than litigation. This is because the process is more flexible, and arbitration agreements frequently limit how much information parties present for consideration.
There is also the potential for more creative outcomes in arbitration. The arbitrator may have more room to order non-monetary remedies that can be appropriate for a specific situation.
Drawbacks of arbitration
Arbitration agreements generally benefit employers more than employees. Arbitrators tend to be less sympathetic to employees than judges and juries are, and tend to award less money when they do rule in favor of employees.
Further, the same limits that can be advantageous in making these claims move more quickly can restrict the information employees present to support their case.
There is also the possibility that an arbitration ruling cannot be appealed, while employees are able to appeal unfavorable court rulings.
For employers, arbitration may be more costly than litigation, because there are arbitration fees and costs that would not be incurred in court. Particularly when faced with a small matter, it may be more cost-effective for an employer to settle rather than arbitrate.
Considering your options, alternatives
If you are an employee, you may not have much choice about signing an arbitration agreement if it is a condition of employment and you want the job.
However, an experienced employment attorney may be able to help you negotiate a more favorable agreement than what your employer presents.
If you are an employer, consider whether arbitration will be in your best interests in all circumstances. Are there alternatives that could be a better fit?
Talking to an attorney can help you get the information you need to make informed decisions on arbitration agreements or any other type of employment contract.