Arbitration

In a previous post, we reviewed the mediation process and its advantages to the parties in a law suit or a threatened one.

There is a further alternative to taking a case to court which is “arbitration”. The parties can voluntarily agree to use this process when a dispute arises. Sometimes there may already be a provision in an employment agreement which mandates that the parties use this process instead to going to court.

What is It?

Arbitration means that the parties use an agreed person, usually an experienced employment lawyer or a retired judge to hold a hearing instead of going to court. There is also usually a term that there will be no appeal and the decision of the arbitrator will be final.

Why Use Arbitration?

The desire for secrecy is only one motivator for the use of arbitration. Many companies and individuals do not want their legal disputes aired publicly for a variety of reasons. There are also other reasons to use arbitration.

The Pros

There are many distinct advantages to this process which include (1) the right of the parties to choose the arbitrator; (2) the process can be simplified as may be desired by, by for example, limiting or eliminating discoveries which is a pre-trial process in the civil court system; (3) the time period to arrive at the hearing is much faster; (4)  the hearing is not public, nor are the reasons for the decision as is the case for a normal court action and (6) the right to appeal is eliminated although the “judicial review” process with its higher review standard will still be possible. The documents or pleadings which make the case are not public, unlike usual court documents.

Avoiding Class Actions

An employment agreement which contains an arbitration term can be used to avoid class action cases, as Uber successfully recently asserted.[1] In this case, the judge upheld the arbitration term, which required the parties to proceed to arbitration in the Netherlands on an individual basis. It is hard to imagine that this can be done today.

The Cons

There are some disadvantages to using arbitration. One is the additional cost for both sides as now the expenses of the arbitrator are added to the costs. The agreement may alter the costs by denying costs to the winner or providing some other formula defining the loser’s obligation.

Other Considerations

The “trial” process tends to be more flexible. This can be a pro or a con. The lack of an appeal process is intended to demonstrate that the arbitration is intended as a final result.

Damages for Violations

The arbitration agreement can be an effective way to keep the issues in dispute private. There can even be included a clause which defines the damage sum to be paid should either party violate the secrecy term. This presumes that the sum set out is a valid and genuine “pre-estimate” of the damages to be suffered and is not intended as a penalty clause. Essentially this means that the sum agreed to should be realistic and able to be justified, if challenged as a penalty term.

Let Advice Guide Your Actions

Arbitration can be a plus or a negative. If you have questions about arbitrating an employment dispute, contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation

 

 

 

 

 

[1] Heller v Uber