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What is Arbitration?

Are you a part of an arbitration hearing that handles disputes arising from your employment or business relationship? Did you agree to the arbitration to avoid court proceedings by handling your case through an arbitral tribunal?

At Rosenfeld Injury Lawyers, LLC, our personal injury attorneys can provide immediate legal advice on gaining an advantage when dealing with domestic and international disputes through arbitration. Call our law office at (888) 424-5757 (toll-free phone call) or use the contact form today to schedule a free consultation.

All confidential or sensitive information you share with our legal team remains private through an attorney-client relationship.

Arbitration is a civil justice method that can be used instead of traditional court trials. It involves parties coming together to resolve their dispute in an impartial atmosphere with the help of a neutral third party known as an arbitrator.

According to the American Arbitration Association, the appointing arbitration institution authority handles an estimated two million arbitrations between disputing parties every year in the United States. In addition, the Association estimates that hundreds of thousands of arbitrations happen nationwide involving other individuals and groups.

Mandatory versus Voluntary Arbitration

An arbitration agreement for dispute resolution can be mandatory or voluntary based on what all parties agree. Unlike mandatory arbitration, involuntary arbitration, both sides in the dispute agree that an arbitrator will handle their disagreement when it arises and evaluate options, evidence, and testimony from other parties to resolve the dispute.

Many employment and commercial contracts have mandatory dispute resolution arbitration written into the document, subjecting any disagreement to be handled through arbitration.

Conversely, voluntary arbitration occurs when all parties agree to use an arbitrator (decision maker) to handle all arbitrator issues to avoid taking legal issues to court. Many consumer advocates prefer voluntary arbitration in recent decades where an arbitration tribunal resolves disputes without traditional court procedures.

In some cases, the contract will specify only certain disputes that can be resolved through arbitration and spell out exactly how the arbitrator will decide the case and make an arbitration award. Many of these agreements involved binding arbitration where the dispute resolution cannot be appealed to state or national courts.

Binding Versus Non-Binding Arbitration

In many cases, an arbitration clause will identify whether the arbitrator’s decision is binding and final. In these scenarios, the arbitration clause specifies that the decision cannot be reviewed or overturned in court through legal procedures except under minimal circumstances, including misuse of power or fraud by the other party.

Conversely, non-binding agreements allow the rejection of an arbitration award and demand the dispute to go to court when any parties choose to do so. During or after the arbitration, the parties can treat a non-binding decision as an independent assessment of the lawsuit’s strengths or weaknesses to settle their dispute.

Arbitration at the National Level

In 1925, the US Supreme Court held that the Federal Arbitration Act (FAA) establishes the public policy favoring arbitration at the federal level. However, until the 1980s, the federal courts did not allow arbitration for “federal statutory claims” under the “non-arbitrability” doctrine.

It was then that the Supreme Court reversed its decision and began requiring arbitration if the arbitration agreement was included in a contract involving federal statutory claims for resolving disputes.

According to the American Arbitration Association, consensual arbitration where all parties participate through mutual agreement can occur in many scenarios, including:

  • International commercial arbitration
  • Judicial arbitration
  • Baseball arbitration
  • Consumer arbitration
  • Labor arbitration
  • Bracketed arbitration
  • Uninsured motorist agreements
  • Domestic, commercial arbitration
  • Nursing home admissions
  • Rights arbitration (grievance arbitration)
  • Interest arbitration

The Arbitration Process

According to the American Arbitration Association, arbitration agreements are used as a private process where disputing parties agree that one or more individuals will resolve the dispute after hearing arguments and receiving evidence.

The arbitration decision is not always legally binding. However, non-binding arbitration usually involves disputes based on minimal circumstances where two parties want to avoid traditional litigation and not have a jury decide the matter.

Arbitration differs from mediation or conciliation because it uses a neutral arbitrator with a power of authority to decide how the dispute will be resolved. The arbitration process is much like a trial in that all parties involved will make an opening statement, argue their case, and present evidence to one arbitrator.

Many businesses use arbitration to avoid a traditional trial due to its quick resolution in a less formal setting. For example, arbitration usually does not require the parties to follow federal or state rules of evidence.

Binding Arbitration

If the arbitration agreement dictates, the arbitrator might not be required to follow governing law before making their decision. Traditionally, the arbitration process is not binding or non-binding.

However, some arbitration agreements specify that the arbitrator’s decision will be binding where the decision is final and enforceable by law. Thus, typically, only the losing party will appeal the arbitrator’s decision on very narrow grounds.

An arbitration agreement that allows a non-binding decision usually recognizes the arbitrator’s award as advisory, where the decision is final only when accepted by all parties. Both parties will often treat non-binding decisions as an independent assessment of the lawsuit’s strengths and weaknesses.

Arbitration Agreement

Many business relationships have arbitration agreements to arbitrate disputes using an intermediary to avoid going to court. In many cases, an arbitration agreement will designate who will handle the arbitration, including a roster of groups of practicing attorneys or retired judges.

An arbitration agreement provides a popular pathway for companies to limit their legal fees through a contractual agreement. However, agreeing to arbitrate a dispute requires giving up specific rights to gain benefits.

During the arbitration process, both parties will typically limit their rights to obtain documents and exchange information from each other. Most arbitrations happen in a conference room, far away from the courthouse, where the arbitrator could be a retired judge, acting lawyer, or another individual with experience in a specific business or judicial industry.

Advantages and Disadvantages of Arbitration Agreements

Before signing a mandatory arbitration agreement, understand the right you are giving up and the benefit you gain in resolving your legal disputes. There are significant advantages and disadvantages to signing an arbitration agreement in any business relationship or employment dispute.

Advantages:

  • Arbitration is typically less expensive and faster than litigating a dispute in court
  • Arbitration is held in a confidential setting, meaning that witnesses and participants will not publicly testify nor have documents or evidence a part of the public record.
  • During the arbitration, both sides can decide who will handle the dispute, which can be particularly helpful when the decision maker specializes in legal or technical knowledge.
  • Many employers require a newly hired worker to sign an employment arbitration agreement before starting their job.

Disadvantages:

  • Arbitration awards decided by the arbitrator cannot be appealed in a court of law. Instead, both sides must accept the arbitrator’s decision as a final resolution.
  • Arbitration is an effective alternative dispute resolution process that avoids a jury trial. However, not presenting evidence to the jurors could result in a negative outcome because jurors tend to be more emotional toward the injured party.
  • The amount of information exchanged between parties is significantly more limited during the arbitration process, making it more challenging to develop a well-rounded case.
  • Workers required to sign employee arbitration agreements are never asked if they want to arbitrate a dispute, giving up their right to pursue the claim in court.

The arbitration clauses of commercial arbitration agreements are much like all contracts that favor the legal team’s side that wrote the agreement. Typically, resolving a dispute through the court system provides additional remedies that do not deny the injured party the right to an attorney.

While it is true that arbitration agreements limit litigation expenses and keep the dispute confidential, signing an arbitration agreement usually means giving up fundamental rights that might be necessary to resolve the business dispute amicably.

Before signing any arbitration agreement, it’s essential to read the arbitration clauses and renegotiate or reject any arbitration clause that does not provide you an equal voice.

Recent Supreme Court’s Decision

The US Supreme Court’s 2018 decision concerning arbitration (Epic Systems Corp. v. Lewis) appears to provide employers an opportunity to avoid class-action lawsuits by mandating that their workers sign a binding arbitration agreement.

However, their decision may not be beneficial to either the employer or the worker due to the higher cost, the inability to appeal the case or create an environment where such matters end up in court.

Get Out of Your Work-Related Arbitration Agreement through Legal Representation

Our legal team can help negotiate your way out of an arbitration agreement you are forced to sign under duress, coercion, or fraud. Typically, the arbitration agreement is riddled with hidden clauses buried deep in the paperwork that forces the worker to use an arbitrator for any legal dispute, waiving your right to try your case in front of jurors in a public court.

Our legal team understands that every worker must have the intention to agree to arbitration before signing any document. We know that the employer cannot force any worker to arbitration if they sign the document under duress or fraud.

Our attorneys know that any unreasonable arbitration agreement cannot be enforced, allowing the signer to escape mandatory arbitration. To be enforced, the courts require a reasonable agreement signed without fraud or coercion by a worker who had the intention to agree to arbitrate.

Contact our law office today at (888) 424-5757 (toll-free phone number) for legal advice and legal representation to resolve any dispute over your arbitration agreement. All confidential or sensitive information you share remains private through an attorney-client relationship.

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