Arbitration of Employment Disputes

posted by Michael Fortney  |  Dec 15, 2009 12:49 PM in Arbitration and Mediation

Arbitration is a voluntary process, requiring an agreement between the parties to the dispute. The agreement to arbitrate may be entered into at the time of the dispute, or before the dispute arises. Arbitration involves the presentation of a dispute to one or more arbitrators, instead of a court. Employment law arbitrators are usually employment lawyers or experts in the field of employment. The arbitrator makes factual and legal determinations, without the use of a jury. An arbitrator's decision is usually binding on all parties, and is difficult to modify or vacate.

Arbitration as part of Alternative Dispute Resolution

Arbitration is usually the last step in an alternate dispute resolution (ADR) process. ADR usually starts with an informal process, building up to arbitration. The informal steps can include an "open door" policy, a grievance process and perhaps mediation. Arbitration is typically used only after the informal procedures are exhausted.

Benefits of ADR for employers

An ADR program can benefit employers through:
  • early detection and correction of meritorious complaints;
  • a streamlined process for litigating disputes;
  • reduced costs and attorneys fees. Whether arbitration actually reduces litigation costs is currently an open question; and
  • elimination of juries, reducing the possibility of irrational verdicts.

Costs of ADR for Employers

Many courts and some arbitration services require the employer to pay for the costs of the arbitration. Arbitrator fees and costs for the arbitration services can range from $15,000 to $50,000 and more.

Arbitration decisions are final. Nothing guarantees an employer that the arbitration decision will be rational and well supported. If it is not, then the employer generally cannot appeal the decision.

Benefits and Costs of ADR for employees

An ADR program can benefit employees by providing an effective method to voice disputes and a timely way to decide claims. However, an employee will not be able to take a case to court and present his or her case to a jury. Further, if the employer believes that mandatory arbitration will result in lower recovery for the employee, the employer will have less of an incentive to settle, or will offer less to settle.

Considerations for implementing an ADR policy

In implementing an ADR policy, businesses should consider whether to make the ADR policy voluntary (on a case by case basis) or mandatory. Companies also need to decide what type of dispute should be covered by the policy. For example, should an employee only be allowed to complain of conduct prohibited by law, or should any complaint be heard?

Companies should also decide what steps to require before going to arbitration. Many policies required the filing of a grievance before arbitration. Policies also may require mediation before arbitration.

Importantly, the parties to an arbitration agreement should decide who will administer the arbitration. The American Arbitration Association, the Federal Mediation and Conciliation Service and Judicial Arbitration and Mediation Services offer arbitration administration services. Also, the cost of the arbitration is an issue. An employee can file a lawsuit for a small filing fee. Arbitration, on the other hand, can have a significant filing fee, administrative fees, and fees for the arbitrator.

If you want more information with regard to an arbitration agreement with your employees, give us a call.

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