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Arbitration is a form of private dispute resolution. Like litigation, arbitration is a binding, adjudicatory process that parties engage in to settle disputes fully and finally. The requirement to settle disputes through arbitration in the employment arena is usually driven by a pre-dispute contract that both parties enter into, such as a contract of employment. These contracts contain provisions requiring disputes to be handled through private arbitration, thus avoiding a public court system altogether. Decisions rendered in arbitration are usually final and without recourse to appeal the decision to a higher court, a distinguishing factor from traditional litigation.  

Arbitration is administered by a private organization and heard by an arbitrator who acts as the neutral fact finder and judge. Each private organization maintains a list of available arbitrators and provides the rules for which the arbitration process will be conducted. This process is governed by the Federal Arbitration Act and the arbitration laws of the state where arbitration occurs.  

An arbitrator acts similarly to a judge at the arbitration hearing by taking testimony from both parties, reading briefs, and examining evidence. Once the hearing is concluded, the arbitrator renders an opinion on liability and damages. After the arbitrator’s opinion is reviewed and confirmed by a court with appropriate jurisdiction, the findings are entered as a judgment.  

Benefits of Arbitration 

There are benefits to both litigation and arbitration, and these benefits largely depend on the parties’ desired result. If one desires to create case law and establish precedent, then litigation would be the route that will yield that result. On the other hand, if what a party seeks is a private resolution without precedential value, then arbitration is the better route to take. This is because the public may not sit in arbitration proceedings, nor may they publicly access any record created that facilitated the arbitrator making their decision. Additionally, an arbitrator is required to uphold and safeguard the confidentiality of the arbitration proceedings.  

Another benefit of arbitration is that the process is quicker and generally more cost-effective than litigation. Parties generally will spend less on legal fees and come to a resolution much faster than in court because the arbitration process is more streamlined, with fewer procedural hurdles.   

Arbitration is also often seen as more impartial than the court system. This is mainly because both parties to arbitration have a say in selecting the arbitrator who ultimately hears the case. The parties can establish baseline criteria for their desired arbitrator, choose from a list of available arbitrators, or have an arbitrator selected for them.   

Proposed Changes   

There are many proposed changes to the current arbitration process. Some of them include clarifications of current rules and procedures, while other changes expand upon or add additional rules. For example, the proposed changes clarify the procedures for determining which agreement applies when that is the issue in dispute and specify that hearings will be held virtually unless an in-person hearing is necessary for a fundamentally fair process.  

Other proposed rule changes add authority for arbitrators to order appropriate sanctions upon a party’s request. These changes also add authority for arbitrators to modify or clarify an award on their own initiative — this was previously left up to the parties. Additionally, the proposed changes added rules specifying an arbitrator’s enforcement powers.  

Finally, the proposed changes expand confidentiality rules. Previously, only an arbitrator was required to maintain confidential proceedings and make rulings to safeguard that confidentiality. Under the proposed changes, both the AAA and the arbitrator are required to keep all matters relating to arbitration or the award confidential. This proposed change also protects trade secrets and confidential information.   

Employers Council will continue to monitor the proposed rule changes and will provide an update. For questions on arbitration and how the proposed changes could affect you, please reach out to us at info@employerscouncil.org.  

Edward Encinias is an attorney for Employers Council.