Many employers ask what they can do to avoid lawsuits. One of the best ways businesses can be more proactive in avoiding legal disputes and their attendant costs is to implement arbitration clauses as part of their employment contracts.
Arbitration has traditionally been viewed as less expensive than litigation. While that’s not necessarily true in every case, arbitration certainly has its advantages, such as:
· increased likelihood of preserving relationships;
· confidentiality; and
Arbitration is often resolved much more quickly than litigation. As new employment laws and ordinances are enacted, litigation increases. There is a correlation there. And employment litigation can be particularly time-consuming because of the plethora of documents and opinions involved.
In an arbitration, however, the parties can streamline the process and resolve differences more quickly than they would in litigation. Remember, time is money, so an important advantage of arbitration is facilitating quicker and cheaper dispute resolution.
Arbitration can also be advantageous when an employee involved in the dispute is still employed. Because arbitration is less formal and the parties know they need to continue to work together, arbitration can be more successful than litigation at preserving and continuing relationships.
A third advantage of arbitration is that there are no public pleadings filed at courthouses. The proceedings are private, which can help preserve a company’s reputation and the building blocks of its business.
Arbitration also gives the parties more control over the proceedings. Depending on how the arbitration agreement is laid out, the parties can choose the arbitrator or arbitrators, as well as the processes for discovery and evidence. Again, this can be very important in helping to reduce the time and costs of disputes.
State’s generally allow employers to include an arbitration clause in employment agreements, as well as freestanding arbitration agreements. Some states, however, will scrutinize these clauses more than others.
Generally speaking, arbitration clauses must be viewed as fair to all parties to be enforceable. This basically means that the rights given to the parties must be balanced. If an arbitration clause gives an employer greater rights than an employee, it may very well be invalidated by the courts. In such a case, the employer would lose the benefits of the arbitration provision.
As your Business Lawyer, we will work with you to ensure that the agreements your employees sign have the best employment arbitration provision for our state laws.
As part of a comprehensive Business Protection Strategy Session, we will review not just your employment agreements, but all agreements your company makes with vendors, clients, and others in support of your business.
This article is a service of Satin Legal, Inc. We offer a complete spectrum of legal services for businesses and can help you structure your operations for success. One of our primary services is a Business Protection Strategy Session, in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, and employment structuring systems you need to start your next business and succeed right out of the gate. Call us today to schedule a time to have a conversation!