In today’s climate of frequent lawsuits, many employers seek to protect themselves from expensive litigation by requiring employees to sign a mandatory arbitration agreement. This agreement is generally part of the new-hire paperwork, and refusal to sign may be grounds for the job offer to be rescinded. Arbitration works well for many disputes, saving time and money for both sides. However, there are also disadvantages to the process. Provided here is a guide to the issues surrounding mandatory arbitration in the workplace.

The Arbitration Process

Arbitration begins with the aggrieved party filing a written notice called a Demand for Arbitration. The opponent receives a copy of the Demand, as does the arbitration organization, such as the American Arbitration Association or the National Arbitration Forum. The notice summarizes the complaint and asks for specific relief, including a dollar amount of damages. The other side then has a limited time to file a response and a counterclaim, which may also include a request for monetary damages.

When the arbitration organization receives both the complaint and response, it will provide the parties with a list of potential arbitrators along with a brief summary of their backgrounds. The parties must then mutually agree on the arbitrator that will be used, after which a hearing date and time will be set. Unless a pre-hearing conference is requested, there will be no contact between the arbitrator and either party prior to the hearing.

The hearing resembles a mini-trial, but is held in a conference room without a jury. Both sides have the opportunity to present a case, call witnesses and cross-examine each other’s witnesses. Both sides may also make closing statements. Lawyers are permitted, and are highly recommended. The arbitrator’s decision is generally filed within 30 days.

Advantages of Arbitration

Arbitration generally saves time and money. While a court case may stretch over months or years, an arbitration case can often be resolved in a matter of weeks. Pre-trial motions, hearings and discovery are generally dispensed with, allowing the parties to hire legal representation for only one or two days. Most arbitrators are highly experienced attorneys or former judges who are able to grasp the issues of even very complex disputes.

Disadvantages of Arbitration

Except in the most extraordinary of cases, the arbitrator’s decision is binding. There is no appeal process unless dishonesty, misconduct or bias on the part of the arbitrator can be proven. Because arbitration decisions are generally not subject to apeal, the arbitrator may be inclined to decide a case based on his or her notions of fairness, or of what appears to be a reasonable compromise, rather than strict adherence to law. This can result in contract rights or statutory rights being disregarded by an arbitrator inclined to compromise.

As pre-trial discovery is dispensed with, the first chance that each side has to see the other’s documentation is generally at the hearing. It can be difficult to fully examine documents to determine their accuracy and completeness under the time pressure of a hearing. Arbitration hearings are not subject to the strict rules of evidence that govern court cases. Hearsay and other such testimony may be allowed.

In many states, punitive damages and other special awards are not permitted in arbitration cases. This may limit the monetary damages to which the complainant would otherwise be entitled. A lack of a sympathetic jury may further limit monetary compensation.