Alternative Dispute Resolution Law
Arbitration is one of the alternative ways to end a civil legal dispute, giving you and the other party the opportunity to resolve the issue outside of a courtroom and avoid litigation. The process of arbitration generally consists of:
- Choosing a neutral third party, known as the arbitrator, to hear the issue
- Both sides presenting testimony and evidence to the arbitrator
- Arbitrator issues a decision
Arbitration is a form of alternative dispute resolution like mediation. One key difference between mediation and arbitration is that an arbitrator's decision is typically considered binding, though some arbitration is non-binding.
If the parties have agreed to binding arbitration, the courts typically consider the decision binding and infrequently reconsider any award given by the arbitrator.
An attorney can help you determine whether arbitration is required in your circumstances or whether it is an option for alternative dispute resolution, as well as whether the determination will be binding and the legal options you may have based on your situation.
Arbitration is frequently used in contract or agreement disputes but this method of dispute resolution is increasingly popular in other types of cases. Most civil claims allow for you and the other party to voluntarily choose arbitration to resolve your dispute, but some agreements you enter into may require arbitration.
Some contracts or agreements may include a section known as the “arbitration clause." This means that you and the other party agree in advance to handle any future disputes through the arbitration process instead of suing each other in court.
These clauses are commonly found in employment or union agreements to work through any issues that arise over hours, working conditions, pay, or other concerns. Another occasion an arbitration clause may appear is in a business transaction. A business providing a service or product may provide in their contract that they wish to handle any issues outside of court with an arbitrator instead. International business agreements typically have arbitration clauses as well.
A growing number of companies are turning away from enforcing arbitration clauses in instances of sexual harassment or employment issues in general. States like California and New York have taken steps to prevent arbitration clauses from being enforced in some employment disputes as well.
Some state or federal courts or laws may require court-ordered or judicial arbitration for certain issues. A growing number of states require this form of alternative dispute resolution for auto insurance claims, public sector employment disputes, and medical malpractice claims. Often claims that fall short of the threshold for a civil court trial but exceed the limit for small claims court require arbitration.
This differs from other instances of mandatory arbitration because the decision is non-binding. If a party is not satisfied with the outcome, they may choose to go forward with a trial. Oftentimes there is a set time limit in which you have the right to object, but the decision is final and binding when that time period is over. If you go through with the trial and it does not have a better outcome than the arbitration, some jurisdictions may hold you responsible for any court costs and fees for the arbitrator.
There are a number of benefits and disadvantages to consider when discussing arbitration with your attorney. While you may have to proceed with arbitration by court order or a clause in an agreement, it is important to be familiar with the pros and cons of this dispute resolution method.
Arbitration has a number of benefits you will want to consider with your attorney when determining how to proceed with your claim. One upside is that arbitration hearings are not public record since they do not take place in a courtroom, allowing you to maintain a greater deal of privacy.
Generally, arbitration is faster and less expensive than litigating an issue in court. Because arbitrators do not always have the same heavy caseload as judges, the process is generally more streamlined than going through the court system. You may avoid having to attend multiple hearings or depositions and additional discovery or court filings, and that will save you from paying the associated costs and fees as well.
Arbitration may feel more fair because both parties need to agree on the arbitrator that will preside over their issue. This allows both sides to pick an arbitrator who is more familiar with the type of issue in dispute, allowing the arbitrator to make an informed decision on the dispute so both parties feel like they can move on after the ruling.
Depending on your situation, arbitration may not be the best option. Since the decision by the arbitrator is binding in most cases, this process may leave you with no choice but to comply with the final decision. This may mean you recover nothing for your losses or you might be bound to compensate the other party, leaving you no further options or the ability to bring the claim again.
Others feel as though this process lacks transparency since arbitration is private and not a matter of public record. In instances where the arbitration involves a large entity like a business or employer, consumers or employees often feel as though they have less power in this process as well. This opens up the possibility that the arbitrator may not actually be as objective or neutral as they appear, especially if the arbitrator is from an agency or is frequently involved in matters with the same business.
Although sometimes the cost of arbitration may be reduced, some arbitration may actually be more expensive than resolving the matter in court. The arbitration fees and administrative costs may end up being drastically more than the cost of pursuing a lawsuit depending on the jurisdiction and type of claim.
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