Arbitration


Arbitration is a process where a professional neutral arbitrator administers a process to hear the evidence from the parties in a dispute, and issue a decision on the legal or contractual merits of the claim. Arbitration can resemble an abbreviated litigation procedure before a judge, but the arbitrations are often private processes that occur outside of the state or federal courts. The arbitrator may be an independent private arbitrator, or may be associated with a large private arbitration service like the American Arbitration Association, or JAMS.

Sometimes the parties in an employment relationship have a written contract that requires the parties to participate in arbitration of disputes, or they are covered by a union collective bargaining agreement the provides arbitration. Stated briefly, these "contractual arbitration" procedures begin when a party requests to aribitrate a dispute under the contract. The precise procedure that will be followed varies with the arbitration agreement, and the private arbitrator or organization that provides the arbitration program. Initially, there will be a mechanism for the parties to select an arbitrator to hear the dispute. The arbitrator then leads the arbitration, which may include pre-hearing telephone conferences with the parties regarding scheduling and the procedures that will be followed. Then the parties usually engage in limited discovery of evidence, which may include requests for information and documents from the opposing party, and depositions where the parties are questioned and recorded. Then an arbitrator holds a hearing where the parties present their evidence and make their arguments to the arbitrator, and question the opposing parties and witnesses. The arbitrator may have the parties submit written briefs about the case before and after the hearing. Then the arbitrator will evaluate the evidence and issue a written decision (also called the arbitration "award"). If the decision is in favor of the employee, the arbitrator may order the employer to provide monetary damages and other remedial relief. Sometimes the winning party may seek to have a court confirm and enforce the arbitration award, or the losing party may seek to have a court vacate or correct the arbitration award. The court may have limited authority under the law to review the arbitrator's decision for errors of fact or law.

Some rules of courts and state laws require that the parties in litigation engage in "judicial arbitration" of certain litigated matters before a trial is conducted. The decisions resulting from these judicial arbitrations may or may not be binding on the parties. Some state laws provide for binding judicial arbitration of cases where the amount of money in controversy is small (for example, less than $50,000). The arbitrations required under rules of courts may be non-binding on the parties who may elect to have a court trial after the arbitration. The purpose of these non-binding arbitrations is to enable the parties to present and assess evidence about the case, and evaluate the settlement value of the case, and have a neutral fact-finder state an opinon on the legal merits of the case.

Advantages of arbitration are that it is usually shorter and less expensive than litigation, a decision is made on the merits of the claim, and the arbitrator may have subject matter expertise in the field of the dispute. Disadvantages of arbitration may be that limited discovery does not allow the parties to sufficiently develop the evidence, some attorneys assert that arbitrators may favor parties who have repeat business with them, and the parties may not have the right to appeal the arbitration decision to court.

The cost of an arbitration varies with the type of arbitration and arbitrator involved. The arbitration of a complex matter can be expensive. Often the arbitration contract will specify who pays for the arbitrator and expenses. Sometimes the parties have agreed to equally split the cost of the arbitration. Sometimes the arbitration agreement allows the winning side to seek recovery of attorney fees and costs from the losing side. Some courts have held that the employer has to pay for the cost of an arbitration that is required by an employment agreement.

The parties in an arbitration may not have to be represented by attorneys, but it is usually advantageous to have legal representation. The law regarding arbitrations, and the legal issues related to the cases being arbitrated, are complex and evolving. There is federal law regarding arbitration, like The Federal Arbitration Act. There may also be state laws regarding arbitration, like the California Arbitration Act. There have been many court decisions, and sometimes conflicting decisions, about whether a party can be forced to arbitrate employment-related claims. Some government agencies like the EEOC have taken the position that an arbitration agreement does not preclude an employee filing a discrimination complaint with the agency. There have been court decisions holding that some unfair ("unconscionable") or one-sided arbitration agreements cannot be enforced. There have also been court decisions holding that some arbitration agreements can be rescinded if they result from fraud, undue duress, or mistake. Consult with an attorney if you have questions about whether you can be required to arbitrate, the arbitration agreement and procedures, and the binding effect of arbitration decisions.

As with other legal processes, it is important that the parties know and comply with the time limits that are applicable to the arbitration. If the required time limits are not met, a party may be disadvantaged in the arbitration, or lose the right to arbitrate or litigate a dispute.

If you have questions about arbitration, you can find additional information through the links on this website, and you can ask an attorney or arbitrator, or the organization that sponsors the arbitration program.


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