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Arbitration
Unfortunately, conflict is inevitable. Arbitration can resolve workplace disputes fairly and quickly. Read on to consider how it can help your organization.

What Is Arbitration?

Arbitration is a process for resolving disputes outside of the courtroom. During the arbitration process, both parties present their evidence and arguments to the arbitrator, who then makes a decision. The decision of the arbitrator is usually binding, meaning that both parties must abide by the decision. Arbitration can take place in person, online, or through written submissions. It can be voluntary or mandatory, depending on the agreement between the parties involved. Arbitration is often used as an alternative to going to court because it is generally faster, less expensive, and less formal than traditional litigation. It is often used in disputes involving contracts, labor and employment, construction, and consumer disputes.

Arbitration vs Litigation

Arbitration and litigation are two different methods of resolving legal disputes.
  • Litigation is a formal and structured process that takes place in court.
  • Arbitration is a private process that takes place outside of court.
While both methods have their advantages and disadvantages, the choice of method depends on the specific circumstances of each case. In litigation, the parties present their cases in court, and the judge or jury renders a decision based on the evidence and arguments presented. Litigation is a formal and structured process that involves the application of legal rules and procedures. Arbitration, on the other hand, is a private process for resolving disputes outside of the court system. In arbitration, the parties agree to submit their dispute to a neutral third party called an arbitrator, who hears the evidence and arguments presented by both sides and renders a decision. Arbitration is generally faster, less formal, and less expensive than litigation. One of the key differences between arbitration and litigation is that the decision in arbitration is final and binding, meaning that the parties agree in advance to abide by the arbitrator's decision and waive their right to appeal. In litigation, however, the losing party can usually appeal the decision to a higher court. Another difference between arbitration and litigation is that the rules of evidence and procedure are more flexible in arbitration. For example, the arbitrator may allow evidence that would not be admissible in court, and may set his or her own rules for the conduct of the hearing.

Types of Arbitration

There are different types of arbitration, each with its own set of rules and procedures. In this section, we will explore three common types of arbitration: binding vs non-binding arbitration, voluntary vs mandatory arbitration, and ad hoc vs administered arbitration.

Binding vs Non-Binding Arbitration

Binding arbitration means that the arbitrator's decision is final and cannot be appealed except in rare circumstances. Both parties agree to be bound by the arbitrator's decision. Non-binding arbitration, on the other hand, means that the arbitrator's decision is advisory and not legally binding. The parties may choose to accept or reject the decision and proceed to litigation if they are unable to reach an agreement.

Voluntary vs Mandatory Arbitration

Voluntary arbitration is when both parties agree to participate in the arbitration process. This is usually done by signing a contract that includes an arbitration clause. In mandatory arbitration, one party has the power to compel the other party to participate in the arbitration process. This is usually done by including an arbitration clause in a contract that is offered on a take-it-or-leave-it basis, such as a consumer contract or an employment agreement.

Ad Hoc vs Administered Arbitration

Ad hoc arbitration is when the parties agree to the rules and procedures that will govern the arbitration process. This is usually done in the arbitration agreement. Administered arbitration, on the other hand, is when the arbitration is conducted according to the rules of an arbitration institution, such as the American Arbitration Association or the International Chamber of Commerce. The institution provides administrative services such as appointing arbitrators, scheduling hearings, and managing the arbitration process.

What Does the Arbitration Process Look Like?

The arbitration process typically involves several steps from initiating the process to the final decision. Overall, the arbitration process is designed to provide parties with a relatively quick and cost-effective means of resolving disputes outside of the court system. While the process can vary depending on the arbitration organization and the nature of the dispute, the following steps provide a general framework for the arbitration process.

Initiation

The arbitration process begins with one party filing a demand for arbitration with the designated arbitration organization, often a national or regional arbitration association. The demand typically outlines the nature of the dispute and the relief sought.

Appointment of Arbitrator(s)

The arbitration organization then appoints one or more impartial arbitrators to hear the dispute. The arbitrator(s) typically have experience in the subject matter of the dispute.

Preliminary Conference

The arbitrator(s) typically hold a preliminary conference with the parties to discuss the process and establish a timeline.

Discovery

The parties may engage in discovery, which allows them to request and exchange relevant documents and information.

Hearing

The parties present their cases at a hearing before the arbitrator(s). The hearing may include witness testimony, expert testimony, and the introduction of evidence.

Deliberation

After the hearing, the arbitrator(s) deliberate and make a final decision based on the evidence presented and relevant law.

Award

The arbitrator(s) issue an award, which is a written decision that sets forth the findings of fact and conclusions of law and any relief granted.

Enforcement

Once the award is issued, it may be enforced by a court of law if necessary.

Best Practices for HR in Arbitration

HR departments play an important role in the arbitration process, as we are often involved in the development and implementation of arbitration policies and procedures. Here are some best practices for HR in arbitration.

Prevent Conflict

While arbitration can be an efficient and effective way of resolving disputes, employers should focus on preventing claims from happening in the first place rather than relying on arbitration to resolve them. A big component of this is ensuring that HR policies and procedures are comprehensive and well communicated. These ought to be fair, consistent, and in compliance with applicable laws and regulations in order to be fully effective. Some other proactive measures are:
  • Conflict resolution training
  • Communication training
  • Regular feedback and coaching
  • Promoting a positive work environment
  • Creating a culture of transparency
  • Regular workplace investigations (to promptly and thoroughly investigate any complaints or concerns brought to the attention of HR)
  • Accurate records (Conflicts requiring measures such as arbitration can occur for a wide variety of reasons in any department. Keeping thorough, accurate records in all areas of your business is important because simply having records available can clear up a conflict without need for additional measures, thus avoiding arbitration.)

Develop Clear Arbitration Policies and Procedures

In situations where the employer requires mandatory arbitration (or just prefers it as a method of conflict resolution), the policies and procedures for arbitration should be included in the employee handbook and outline the process for filing a claim, selecting an arbitrator, and the rules and guidelines that will be followed during the arbitration process. These policies and procedures should also include what is expected from each party and be communicated clearly.

Ensure Neutrality

The process for selecting arbitrators must remain neutral and unbiased. This can be done by using a third-party organization to select arbitrators or by having a neutral party within the company make the selection.

Maintain Confidentiality

Confidentiality must be maintained throughout the entirety of the arbitration process to protect the privacy of the parties involved. This can be done by requiring all parties to sign a confidentiality agreement and limiting access to the arbitration proceedings.

Provide Equal Support

This could look like providing resources and assistance in the preparation of documents, education on the process, and training on applicable policies and procedures.

Ensure Compliance With Applicable Laws and Regulations

HR should ensure that the arbitration process complies with all applicable laws and regulations, including those related to discrimination, harassment, and retaliation.

Keep Meticulous Documentation

Ensure accurate and detailed records of the arbitration process are maintained, including all documents submitted and a record of all decisions made.

Trends and Developments In Arbitration Law

Over the years, arbitration has become increasingly popular as a means of resolving disputes, particularly in international trade and commerce. As a result, several trends and developments in arbitration law are worth noting. Here is a list of some of the most significant developments in arbitration law.
  • Expansion of Online Dispute Resolution (ODR). The use of technology has enabled parties to engage in ODR, which can be particularly helpful in international disputes where parties are located in different parts of the world. ODR has become increasingly popular and is expected to continue to grow in popularity.
  • Increased scrutiny of arbitrator selection. There has been a recent trend towards increased scrutiny of arbitrator selection, particularly in cases involving high-stakes disputes. Parties are increasingly concerned with ensuring that the arbitrator selected has the requisite expertise and impartiality to resolve their dispute fairly.
  • Growing importance of ethics in arbitration. Ethical issues have become increasingly important in arbitration, particularly with respect to conflicts of interest and disclosure obligations. There has been a trend towards greater transparency and disclosure in arbitration proceedings.
  • Evolution of arbitration clauses. Arbitration clauses have evolved over time, and parties are increasingly looking to tailor these clauses to meet their specific needs. For example, parties may choose to include provisions relating to the language of the arbitration, the number of arbitrators, and the location of the arbitration.
  • Emphasis on efficiency and cost-effectiveness. Parties are increasingly looking for ways to make arbitration proceedings more efficient and cost-effective. This has led to the development of expedited procedures, which are designed to resolve disputes more quickly and at a lower cost than traditional arbitration.
  • Growth of third-party funding. Third-party funding has become increasingly popular particularly in high-value disputes. This involves a third-party funder providing financial support to a party in exchange for a share of any award or settlement.
  • Recognition and enforcement of awards. There has been an increasing focus on the recognition and enforcement of arbitration awards, particularly in international disputes. This has led to the development of international treaties and conventions designed to facilitate the recognition and enforcement of awards across borders.
These are just a few of the recent trends and developments in arbitration law. As arbitration continues to grow in popularity, it is likely that we will see further developments in the years to come.
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Kayla Farber

Kayla Farber

Kayla is the Chief Innovation Officer at Hero Culture, where the passion is to create company cultures of retention using the power of personality.
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