Arbitration Agreements in Employment Contracts

As an employee, it’s important to understand the ins and outs of your employment contract. One important clause to pay attention to is the arbitration agreement. This clause requires that any legal disputes between you and your employer must be resolved through the process of arbitration, rather than through the court system.

What is arbitration?

Arbitration is a type of dispute resolution process that involves bringing in an impartial third party to hear both sides of the case and make a binding decision that is enforceable by law. This can be a faster and less expensive alternative to a court trial.

Why do employers use arbitration agreements?

Employers typically prefer to use arbitration agreements for a number of reasons. For one, they can be a faster and less expensive way to resolve disputes than going to court. Also, arbitration proceedings are typically private, which can help maintain confidentiality around any sensitive company information that may come up during the dispute.

Arbitration agreements can also limit an employee’s ability to file a class action lawsuit against their employer. This can be significant because class action lawsuits can be expensive and time-consuming for employers, and can result in large payouts for employees.

Are there any downsides to arbitration agreements?

While arbitration can be a helpful alternative to a court trial, there are some downsides to arbitration agreements. For one, employees may feel like they have less power in an arbitration proceeding, since they are not able to have their case heard in front of a judge and jury. Additionally, there is often less discovery in arbitration proceedings, which can limit an employee’s ability to gather evidence to support their case.

Another concern with arbitration agreements is that they can limit an employee’s ability to appeal the decision of the arbitrator. Unlike court trials, there is often no avenue for appeal in arbitration proceedings, which can leave employees feeling like they don’t have a second chance to get a fair outcome.

What should you do if you’re asked to sign an arbitration agreement?

If you’re asked to sign an arbitration agreement as part of your employment contract, it’s important to carefully consider the pros and cons before agreeing. You may want to consult with an employment lawyer to better understand the potential implications of signing such an agreement.

Overall, arbitration agreements can be a helpful tool for employers looking to streamline the legal process and limit the potential for expensive class action lawsuits. However, it’s important to understand the potential downsides of these agreements and to carefully consider whether it’s the right choice for you as an employee.