Arbitration Can Save Dollars and Headaches

If an employee accuses your company of discrimination and takes you to court, the ensuing battle could take years and cost thousands of dollars. When it’s all over, neither side may have much to show for it.
That’s why it might be a good idea to ask employees to agree in advance to binding arbitration if such a dispute ever arises. Arbitration takes one-quarter of the time and costs one-tenth as much as going to court.

It allows your company to avoid jury trials and makes large damage awards unlikely. Your employees benefit, as well, because arbitration allows them a hearing and equitable treatment without costing them much in legal fees.

While it’s an absolute necessity to find knowledgeable legal counsel to draft these agreements, there are several things a business can do to make the introduction go more smoothly:

• Designate a human resources person or someone else who is not seen as management to present the plan. Keep senior executives out of explanatory meetings because their presence can intimidate workers. Employees should feel the process is neutral.
• In small group meetings, explain why arbitration is good for employees and be prepared to answer questions. Emphasize that part of the process involves choosing an arbitrator who is satisfactory to both sides.
• If someone has serious problems with the issue, schedule a later one-on-one meeting. Don’t let the naysayers dominate the group discussion.
• Don’t make this a must-sign situation. The best way to handle it is simply to persuade everyone that arbitration is the right thing to do.
• Make the policy part of your employee handbook. Ask each employee to sign a statement upon hiring or annually signifying that they have read the book and agree to abide by its tenets. In the arbitration section, you might want to specify the percentage of fees paid by the employee, the type of claims or complaints covered, and the rights employees have during the process.

Contact your attorney for more information about arbitration agreements.

Not All Arbitration Agreements Are Alike, But they Generally Work Like This: 

An employee signs a waiver agreeing to arbitrate all potential employment disputes as a way to avoid litigation. In general, this applies to all claims brought under:

• Title VII of the Civil Rights Act, which makes illegal discrimination based on race, color, national origin, sex, pregnancy, religion or religious practices.
• The Americans with Disabilities Act.
• The Age Discrimination In Employment Act.
• Any applicable state fair employment laws.

    Claims filed under workers’ compensation laws or the National Labor Relations Act aren’t subject to arbitration.
    An arbitrator is selected from a panel provided by the American Arbitration Association. First, the arbitrator holds an informal session when both parties have an opportunity to air their sides. This sometimes solves the problem, clears the air and people go away satisfied. But if it doesn’t work, the case goes to formal arbitration. Both sides have legal representation, present evidence and introduce witnesses.

The arbitrator hears the case and makes a final decision.