Arbitration agreement

Definition

An arbitration agreement is a contract in which parties agree to resolve their disputes through arbitration rather than through court litigation. This agreement often specifies the rules and procedures that will govern the arbitration process, including the selection of arbitrators and the location of the proceedings. By opting for arbitration, parties typically seek a more efficient and less formal dispute resolution process that can save time and costs compared to traditional court proceedings.

5 Must Know Facts For Your Next Test

1. Arbitration agreements are commonly found in employment contracts, often requiring employees to agree to arbitration for any disputes arising from their employment.
2. These agreements may be mandatory or optional, but many employers use them to reduce litigation costs and time spent in court.
3. The Federal Arbitration Act (FAA) supports and enforces arbitration agreements in the U.S., making it difficult for courts to invalidate them.
4. Arbitration can be either binding or non-binding, with binding arbitration meaning that the arbitrator's decision is final and legally enforceable.
5. Some courts may refuse to enforce arbitration agreements if they are deemed unconscionable or if there is evidence of coercion or lack of mutual consent.

Review Questions

• How do arbitration agreements differ from traditional litigation in resolving employment disputes?
  • Arbitration agreements provide an alternative to traditional litigation by requiring parties to resolve disputes outside of court. This process is generally faster, more private, and less formal than going through the judicial system. Additionally, arbitration allows for the selection of an arbitrator with specific expertise related to the dispute, which can lead to a more informed decision compared to a judge or jury who may lack that specialized knowledge.
• Evaluate the advantages and disadvantages of using arbitration agreements in employment contracts.
  • Using arbitration agreements can streamline dispute resolution for employers by minimizing litigation costs and time. However, employees may face disadvantages such as limited ability to appeal an arbitrator's decision and potentially biased outcomes if they feel pressured into signing such agreements. Furthermore, if arbitration clauses are not transparent or fair, they could lead to significant power imbalances between employers and employees.
• Critically assess how the enforcement of arbitration agreements impacts employee rights and access to justice.
  • The enforcement of arbitration agreements can significantly impact employee rights by potentially limiting their access to the court system. While these agreements are designed to offer quicker resolutions, they may also restrict employees' abilities to challenge unfair treatment effectively. The prevalence of mandatory arbitration clauses can create a landscape where workers feel they have little recourse against employer misconduct, raising concerns about fairness and accountability in workplace disputes.

Related terms

mediation: A voluntary dispute resolution process where a neutral third party helps the disputing parties reach a mutually acceptable agreement.

binding arbitration: A type of arbitration in which the decision made by the arbitrator is final and enforceable in a court of law, leaving limited grounds for appeal.

dispute resolution: The process of resolving a disagreement between parties, which can include various methods such as negotiation, mediation, arbitration, or litigation.