Examples of arbitration in the workplace function similarly to arbitrations in most other contexts. Arbitration has become a popular option for businesses to resolve workplace disputes. This has contributed to a growing number of mandatory arbitration agreements finding their way into employment contracts and a larger portion of employment law claims being sent to arbitration over other alternative dispute resolution options or litigation.
While there are benefits to resolving disputes through arbitration, there is concern that such an arbitration clause could infringe on workers’ rights and cause harm. This article will examine the process, highlighting the benefits and drawbacks of arbitration to disputes at work and comparing it to taking the same dispute to court. Employees and employers will benefit from understanding an arbitration agreement’s impact on employment.
Defining Workplace Arbitration
It is a process where a neutral decision-maker called an arbitrator hears the facts and proposed solutions from both sides and issues a decision. The arbitrator’s decision is called an award. The award is the final decision in the case. It resolves the case between the parties, which separates it from other alternative dispute resolution mechanisms that allow the parties to resolve the dispute or move on to other dispute resolution options.
While it sounds similar to presenting the case within the court system, and in some ways it is, it is a less formal process, and the arbitrator can combine the issues and create an award between the parties positions. It is less black and white and allows for more gray decisions that allow both parties to win in their way.
Importantly, workplace arbitration will often involve a claim arising from either a situation during an employee’s duties as described in their employment agreement or from a breach thereof or from the employment relationship that exists between the parties. These can be between the employer and the employee or between the employee and other employees.
Many employers require that disputes must be decided in employment arbitration because it can resolve claims quickly and effectively, especially from the employer’s side. An employee handbook may also require that the parties participate in good faith negotiation before the parties agree to arbitrate.
Another distinction with workplace arbitration is that occasionally there is an arbitration administered by an employee or contract employees who work in human resource departments or other dispute resolution positions in employment programs. However, this type of arrangement will often call into question the neutrality of the arbitrator’s decision, so it is best to avoid these types of arbitration agreements.
The Benefits of Arbitration Agreements in Employment Contracts
Arbitration has become a popular option for workplace disputes because it brings a host of benefits with it. Arbitration agreements give companies and employees the ability to resolve their claims without going to court. They also provide several other benefits that separate them from other forms of dispute resolution or litigation.
Arbitration is often much faster than litigation, especially in complicated employment claims or class action lawsuits. Because arbitration is not tied to the backlog in the justice system, the hearings can often be scheduled within a few months of the case beginning, while state courts are often tied up for months or years longer.
Arbitrations will often be less expensive than going to court. Because arbitration is often faster than waiting on court decisions, the attorneys’ fees to cover the cost of the whole ordeal will often be cheaper than an attorney through the course of a lawsuit.
Employment law and other workplace disputes are generally considered more complex than other types of law. Because there are so many different laws and ideas to sift through, it can difficult to distill the issues into ideas that a jury could understand. Arbitrators are often skilled practitioners with years of expertise in a given area of the law. This means that workplace arbitration agreements can often involve an arbitrator with employment law experience.
Arbitration agreements allow the parties to resolve the dispute confidentially. This means that in cases that involve more sensitive matters, an employee does not need to share their story in front of a public audience as they would have to in court. It allows the employee a chance to share more of their story with the arbitrator direct as well. On the other side, if an employer does not want to have the claim reach the public eye, it can be helpful to have it resolved without public discourse.
A Note on Mandatory Arbitration Clauses: Forced Arbitration vs. Voluntary Arbitration
With these benefits in mind, it is also obvious that there are drawbacks to using arbitration for disputes in the workplace. This is especially apparent when the parties sign an employment agreement with a mandatory arbitration clause. Such clauses will require that any dispute arising from the contract must be brought to arbitration. For many employers, this alleviates the cost and hassle of having to have the employee agree later. However, many employees feel that they do not have the bargaining power to negotiate out of these agreements and do not agree to the arbitration clause.
This has caused several collective labor organizations to speak out against mandatory arbitration clauses, including the National Labor Relations Board, which does not recognize such clauses when they interfere with an employee’s ability to lodge a complaint or bring individual claims to the board under the National Labor Relations Act. The Board has agreed that parties may contract out of class action lawsuits and participate in arbitration over the court.
The distinction here is whether or not the employee could negotiate out of the arbitration agreement. Arbitration is meant to be voluntary, which means both the employee and the employer agree to be bound by the arbitrator’s decision. Forced arbitration occurs when one party does not actively agree to participate in the arbitration. The employee feels that they did not have a say in their agreement or that the employer did not act in good faith. This may result in additional provisions that allow the employer or employees to access the court system rather than arbitrating the claim.
Initiating Arbitration With an Arbitration Agreement
To begin arbitration, the parties will need to submit the dispute to the arbitrators. This means that one or both parties will contact the arbitration association that is overseeing the arbitration, such as the American Arbitration Association, to begin the process. If one of the parties disagrees with the claim going to arbitration, they can challenge the enforceability of the arbitration agreement in court.
The Federal Arbitration Act is the standard for challenging arbitration agreements, and such claims have wound their way through the federal courts, even making their way to the Supreme Court. However, unless the agreement is particularly one-sided, the courts will decide that an agreement between an employee or employees and their employer requires employees to submit their dispute to the arbitrator. Some state legislatures have worked to create stronger restrictions on arbitration in certain claims, particularly in California with employment. Once any challenges are resolved, the arbitrator will be appointed and the employment arbitration will begin.
Examples of Arbitration in the Workplace
To better understand how arbitration affects claims between employees and employers, it can be helpful to consider an example or two of such arbitrations and the claim that is resolved.
The first example is a wrongful termination claim. Wrongful terminations are claims against an employer where a former employee feels that they were not fired or terminated correctly for one reason or another. Here, an arbitrator may find that the employer did terminate the employee correctly and leave the parties as they are or they may decide that the employee was entitled to more notice or other considerations. This may mean that they return to work for their employers or they receive more compensation. It could also be a decision in the middle. However, both the employer and the employee must follow the arbitrator’s decision.
Discrimination is the result of an employer or employee treating another person differently because they have protected characteristics, such as race, gender, sexual orientation or identity, disability, and other characteristics. These disputes are often governed by specific local or federal laws, so it can be difficult to only arbitrate these claims; however, they may be arbitrated and the arbitrator may find no, some, or a lot of discrimination.
Sexual Harassment Claims
The final example is a sexual harassment claim. This is an allegation that someone took an action against an employee that was harassing based on gender or sexuality. Many companies will attempt to arbitrate these claims to keep them out of the public eye, but there has been significant discourse on forced arbitration for sexual harassment because it is often against the interests of other employees who may be experiencing the same treatment.
Arbitration can be a powerful tool to resolve workplace issues, but forcing arbitration through employment contracts can raise ethical issues. Knowing how and when arbitration can be helpful is a skill that many employers are learning to evaluate. However, if speed and cost are factors in dispute resolution, arbitration is often the best option for a resolution. Click here to learn more about examples of arbitration in the workplace.
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