HR Management & Compliance

What is Arbitration?

In a previous post, we discussed Google’s recent decision to end forced arbitration for all disputes involving current and future employees, except for disputes that have already been settled. This followed a change late last year that removed the requirement for cases alleging sexual harassment and assault.

arbitration

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We touched briefly on what arbitration is and offered positions for and against it. In this post, we’ll look at arbitration in greater detail.

Definition of Arbitration

Let’s start with a basic definition of arbitration. As one expert puts it: “arbitration is the process of bringing a business dispute before a disinterested third party for resolution. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes that decision is binding on the parties.   An arbitrator is a spectator, witness, or hearer.”
Arbitration is binding—unlike mediation, a distinction we’ll discuss in tomorrow’s post—and essentially takes the place of litigation in a courtroom.

Mandatory Forum

Arbitration can be optional or mandatory, but in recent years more and more companies are moving toward mandatory or forced arbitration. This means if you feel you are wrongly terminated or have been discriminated against by your employer, for example, your only venue for bringing your claim is arbitration.

Arbitrator

An arbitrator is someone  who serves as an impartial third party. Some employees believe arbitrators are more sympathetic to employers, and there is a widely held perception that a jury would be more sympathetic to employees; however, arbitrators are bound to follow the law impartially.

Discovery

Discovery is an essential—and very costly—phase of traditional litigation. It’s the phase where both sides demand the production of documents and other information. Arbitration gives each side less opportunity to request evidence. While this makes the process less expensive, it arguably puts employees at a disadvantage as the company will typically have more expansive records retained relevant to the dispute.

Not Public

Unlike court cases that are generally public, arbitrations occur behind closed doors. This can be a positive or a negative depending on one’s perspective.

No Right of Appeal

While either party can appeal the result of a court case—possibly all the way up to the state supreme court  or to the U.S. Supreme Court—there is generally no opportunity to appeal arbitration decisions.
Arbitration is a very involved and complex process, and we could spend volumes discussing it, but this post lays out the basics of what one needs to understand. In a follow-up post, we’ll discuss the differences between arbitration and mediation—which are often confused.