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Should You Have An Arbitration Clause in Your Employment Contract?

When you are negotiating an employment agreement, there are many things to consider beyond the basics of the job description and salary. Unfortunately, not every employment situation works out ideally, and it is important to prepare for disputes and contingencies that could arise in the future. One contractual element to consider including is an arbitration clause.

Arbitration is a form of alternative dispute resolution. It differs from typical judicial proceedings because it is conducted out of court, with a neutral party serving as the arbitrator. Arbitration can be binding ‘ meaning whatever decision the arbitrator reaches carries the force of law of a court judgment ‘ or non-binding, in which either party can accept or reject the decision of the arbitrator. By and large, when included as an employment clause, the form of arbitration is binding.

Benefits and considerations of arbitration

There are many reasons why this form of conflict resolution is attractive for both employers and employees. First, it is much quicker and simpler than traditional court cases. Because it is a private, more flexible setting, the strict rules of a courtroom do not generally apply. Additionally, arbitrators are not judges and in fact may be appointed from any number of fields. This gives the parties the option of choosing an arbitrator with specific knowledge related to the conflict in question.

One of the biggest drawbacks of binding arbitration is that neither party has the right to appeal the decision. There are very few circumstances in which the ruling might be set aside, although it is uncommon. Generally, both parties have to live with the decision, even if they do not believe it was the right one. And unlike in traditional litigation, the parties do not have an automatic right to discovery (or the sharing of evidence), so the parties can sometimes be at a disadvantage in fully understanding the breadth of the situation.

These types of clauses are common in employment agreements, but not everyone fully understands them. If you are negotiating an employment agreement, speak with a knowledgeable Washington, D.C. employment law attorney at Tobin, O’Connor & Ewing for the advice you need.

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