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The Importance of Arbitration Clauses in Employment Contracts

by | Mar 11, 2024 | Litigation And Counseling |

Have you ever heard of an arbitration clause? It might sound like some fancy legal jargon, but it is something important, especially in your job. Let’s break it down together.

Imagine this. You just landed your dream job. You are excited, ready to work hard and make a name for yourself. But what if something goes wrong? What if you have a disagreement with your employer that you just cannot seem to resolve?

Say, a disagreement over something in your employer’s best practices or code of ethics. Important stuff that would require some sort of resolution and that cannot go by unaddressed.

This is where arbitration comes into play. An “Arbitration Clause” is a fancy way of saying that if there is a dispute between you and your employer, instead of going to court, you agree to resolve it through an arbitrator.

What is an Arbitrator?

An arbitrator (or sometimes a panel of arbitrators) is a neutral third-party appointed to resolve disputes outside of court through arbitration proceedings.

Why Arbitration?

Now, you may wonder what the benefits of arbitration are. There are many. As you know, going to court can cost hundreds of thousands of dollars and precious time that you could use in a way that benefits the business.

In short, the most important benefits of arbitration include:

  • Its cost-effectiveness
  • The faster resolution it can provide
  • Confidentiality
  • Expertise in specific conflict

Going to court can take a long time. Lawsuits can drag on for months or even years. But with arbitration, disputes can be resolved much faster. This means you can get back to focusing on your job sooner rather than later.

Court cases are expensive. Lawyers, court fees and other legal expenses add up fast. In addition, when it’s an employer involved in litigation, there’s a lot at stake, including money, the company’s reputation and more.

In addition to the above, court cases are public records, which means anyone can access the details of everything the parties submit to the court. Absolutely everything could be a matter of public record, which is usually at the very least uncomfortable.

Lastly, arbitrators can be experts in the type of conflict you have. The parties can choose an arbitrator (or panel of arbitrators) that specializes in that type of conflict, which is very helpful as compared to going to court because judges typically see all types of litigation cases.

How Does it Work?

In arbitration, the decision that the arbitrator renders is a final decision and it cannot be appealed in court with very few exceptions.

Who Does Arbitration Benefit?

But now you might be wondering if arbitration favors the employer over the employee. Not necessarily. As stated, the arbitrator is a neutral third party, and you will get a chance to present your evidence. You should also seek counsel to review the documents you signed once again.

In addition, there are certain matters that cannot be arbitrated, regardless of whether the employer includes them in the arbitration agreement. In such a case, it does not matter whether there is an arbitration clause; you can go straight to court to settle the matter.