Arbitration Provision in Employment Agreements: Understanding its Importance
When it comes to employment agreements, one clause that often goes unnoticed is the arbitration provision. This clause outlines the process by which disputes between employees and employers will be resolved. In recent years, there has been a growing trend of including arbitration clauses in employment agreements. In fact, according to a recent study, almost 60% of private-sector, non-union employees are subject to employment agreements that contain arbitration clauses.
So, what exactly is an arbitration provision in an employment agreement, and why is it so important?
Arbitration is a form of dispute resolution that involves a neutral third party, known as an arbitrator, who hears the arguments of both the employee and the employer and makes a final decision. Unlike a court case, where a judge or jury makes the final decision, arbitration is private and confidential.
One of the main reasons why employers prefer arbitration over court cases is that it is often faster and less expensive than litigation. Additionally, arbitration awards are typically final and can only be appealed under limited circumstances. This means that employers can avoid the cost and hassle of a lengthy court battle.
However, employees may be concerned that the arbitration process is biased in favor of the employer. That is why it is essential for employees to carefully review the arbitration provision in their employment agreements before signing.
Some arbitration provisions may include clauses that limit the types of disputes that can be brought to arbitration or require that the employee pay a portion of the arbitrator’s fees. Additionally, some arbitration provisions may prohibit class-action lawsuits, meaning that employees cannot join together to bring a lawsuit against the employer.
While these clauses may seem unfair to employees, it is important to remember that arbitration can be a beneficial tool for resolving disputes. It is often a more efficient and cost-effective option than going to court. However, employees should carefully review the arbitration provision in their employment agreement and seek legal guidance if necessary.
In conclusion, the arbitration provision in an employment agreement is an important clause that should not be overlooked. Employees should understand the implications of agreeing to arbitration and carefully review the terms of the provision before signing. With the right understanding of arbitration, both employers and employees can benefit from this efficient and cost-effective method of resolving disputes.