Abitration Tips

Arbitration can help you avoid expensive court cases -- but it's not always the right choice.

I love spending my Wednesday nights watching "Law & Order" on TV, but you'd never catch me anywhere near a courtroom voluntarily. For while Hollywood might be able to neatly compress an intricate court case into half an hour, this does not reflect reality.

Yet even though I'd like to think my company would be immune to participating in court case dramas, the fact of the matter is that conflict is unavoidable in the workplace.

Disputes can arise anywhere -- from an employee accusing a superior of sexual harassment to a business transaction gone sour.

Fortunately, unresolved disputes do not always have to end up in court. One alternative to litigation is arbitration.

What is arbitration?

Arbitration occurs when you voluntarily submit a dispute to an impartial person or persons for a final and binding decision that holds up in a court of law.

With the exception of criminal cases, virtually all types of disputes are accepted for arbitration proceedings.

Why use arbitration?

Less expensive. Fewer formalities and postponements can make arbitration a substantially cheaper alternative than going to court.

Privacy. Moreover, unlike a trial that is open to the public, arbitration offers a private arena to handle disputes.

Less adversity. Arbitration tends to be less adversarial than a legal trial. Consequently, you have a better chance to continue a working relationship with the other players involved after a decision has been reached.

When to not use arbitration

There are some instances, however, where arbitration may not be the best solution. In cases where a quick injunction is needed (e.g., an employee passing secrets to a rival company), a court of law can act more swiftly.

Also, small claims courts tend to be just as efficient as arbitration proceedings in handing down judgments, but arbitration has the advantage of having no limits on the dollar amount involved in a dispute.

How to make arbitration a viable option

The easiest way to ensure that disputes will be resolved using arbitration is to include a pre-dispute arbitration clause in your contracts and leases.

While off-the-shelf clauses are available, it's important that you consult with a lawyer experienced in arbitration before cementing any clause. This is crucial, as much of the arbitration proceedings will be governed by the wording of the clause.

(Note: You can go into arbitration without a clause as long as all parties agree to it.)

Finding an arbitrator

While locating an arbitrator is as easy as flipping to "arbitration" in the Yellow Pages, you're safest bet is to get a referral.

Possible groups to contact include the local chapters of the American Arbitration Association, Better Business Bureau, or American Bar Association.

You'll find that the majority of arbitrators are lawyers and former judges. However, included in this group are business leaders with experience and knowledge of multiple industries.

Arbitration costs

Generally, there are three fees involved in arbitration. They include a filing fee, arbitrator's fee, and counsel's fee if you decide to be represented by a lawyer.

Commercial arbitration filing fees can range anywhere from $500 to $7,000, depending on the amount of the dispute.

Expect to pay between $200 to $400 an hour in arbitrator's fees. You should designate in the pre-dispute clause how the arbitrator's fees will be split.

Impossible to appeal. Arbitration rulings differ from court rulings in that they are virtually impossible to appeal. Therefore, it's essential that you choose a competent arbitrator who will handle your case fairly.

Choose Well Review bios and evaluate them for their arbitration experience and work history.

Use references. Request to speak to references who participated in arbitration proceedings that were similar to your own.

Disclosures? Make sure that you are aware of any disclosures that could potentially affect the arbitrator's decision.

Keep it neutral.
To avoid future disqualification on the basis of neutrality disagreements, do not meet with potential arbitrators without the presence of all parties involved.

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