Litigation is inconvenient and expensive, and employee lawsuits can be even more costly and time-consuming for businesses, managers, and executives. Employee litigation impedes morale and might prompt other employees to follow with additional claims. This sort of legal action can also reveal information that corporations would prefer to remain quiet to avoid generating negative public relations.
Employers can lessen employee litigation and the associated results through employment arbitration agreements, where a disinterested mediator reviews the facts of the argument and produces a binding decision. The proceedings move more quickly, employee awards are less, and employers win more often in arbitration than in litigation.
However, not all arbitration agreements are equal. In fact, courts regularly throw out those that judges rule are extremely biased for employers or flawed. Employers must understand arbitration agreement limitations to implement useful ones that will present all the benefits they want.
The Arbitration Process
By signing arbitration agreements, employees relinquish their right to file actions against their employers if they have a disagreement. However, the duty to arbitrate varies between agreements. Some employers indicate arbitration is only for specific issues while others demand all disputes go to arbitration. Most employment agreements use binding arbitration where both sides acknowledge in advance that the arbitrator’s ruling will be conclusive, with extremely limited authority for appeal.
An arbitration agreement by itself does not imply that employers are protected from employee litigation over an employment issue. Federal and state regulators can still prosecute employers when employees file actions against businesses for violating pay, discrimination, or other laws and regulations.
After employees or former employees choose to begin the arbitration process, prehearing briefs allow the business and employees to confer their beliefs and explain their evidence to the arbitrator. Throughout the hearing, both sides exhibit their case to the arbitrator. Then the arbitrator makes a decision. After the ruling, an arbitration decision can be recorded as a judgment following confirmation by a court of jurisdiction.
Pros and Cons of Employment Arbitration Agreements
The pros and cons of using employment arbitration agreements as a method to resolve legal disputes vary significantly based on the terms of the contract. While the law is not entirely settled, the trend is favoring upholding and enforcing employment arbitration agreements, unless they fall under specific types of arbitration that unfairly force employees into arbitration. Although it is standard for employment agreement provisions to need arbitration, employers often disagree about the benefits of this system of conflict resolution. These are among the advantages they agree upon:
- Faster and cheaper
- Greater confidentiality
- More predictable process
- Selecting arbitrators with expertise
Along with the positives, arbitration can have adverse outcomes that employers should understand. The limitations of arbitration include the following:
- Employees may begrudge the agreements
- Lack of comprehensive discovery
- Confusion over arbitration
- Inability to appeal
- Less discovery
Although arbitration agreements provide many pros, they can incorporate some notable downsides.
What Employers Should Do Now
Businesses should not see arbitration as a means to restrict the rights of employees to bring up concerns or be compensated if anything goes awry. Instead, employers should consider the process as a system for settling conflicts that does not include the courts. Employers can spot numerous benefits for compelling employees to sign arbitration agreements. However, a poorly written one can be as dangerous as not having one at all. Here are suggestions for employers to consider when designing arbitration agreements that are equitable to employees and will stand up to most challenges:
- Review laws and court rulings.
- Look at your current policies.
- Be up front and specific.
- Explain the benefits.
- Consider the scope.
- Be fair.
With the right agreements in place, both sides can profit from the process rather than dragging issues through the legal system that could take years to finally reach a resolution.
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