Arbitration is a formal process that is similar to court litigation. The arbitrator, in a role similar to a judge, listens to the evidence presented by the parties, then renders a decision. This contrasts substantially from mediation, where the mediator helps the parties arrive at a decision on their own if they can agree, but who has no authority to decide the case.
Where federal law exists, it controls over state law. The Federal Arbitration Act (FAA) was originally enacted in 1925. The FAA provides that arbitration agreements involving commerce are valid, irrevocable, and enforceable contracts unless some legal basis exists (e.g., fraud, duress, etc.) to revoke those contracts. The FAA permits one party to obtain a court order to compel arbitration if the other party has failed, neglected or refused to comply with an arbitration agreement, or a decision arising out of such an agreement.
The federal statute and the courts have clearly demonstrated they will step aside and not decide a case, but defer to arbitration, when it is in place. It is used in cases such as breach of contract, tort claims for injury and damage, and even for cases to enforce federal statutory rights, such as EEO and employment law rights. In Gilmer v Interstate/Johnson Lane Corporation, 500 U.S. 20, 1991 U.S. Lexis 2529 (1991), the Supreme Court said that “By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute, it only submits to their resolution in an arbitral, rather than a judicial, forum.”
One of the most essential questions in arbitration is whether the arbitration decision can be appealed to a court or not. In general, if a person voluntarily goes to arbitration, it is binding and final. If the person was ordered to arbitration by a court, or had to use arbitration because it was required in a union contract or some statutory requirement, the results of the arbitration can be appealed to court. However, note that most often, a court will not overturn the decision of an arbitrator unless there are very extreme circumstances. The matter of the finality of arbitration is discussed further in the following link:
Arbitration in Florida: Voluntary or Court-ordered
The Constitutional limitation on final arbitration in employment disputes is further discussed in the section titled “Employment Arbitration”.
Essentially, any dispute can be referred to arbitration. However, most arbitration cases arise from some specific sources:
- Automobile “Lemon Law” disputes arising out of vehicle nonconformity with new car warranties.
- National Association of Securities Dealers (NASD) disputes arising out of transactions and fiduciary duties involving investment securities.
- Employment disputes arising out of Discrimination and EEO claims.
- Employment disputes arising out of other employment-related statutes.
- Employment disputes arising out of union collective bargaining agreements.
- Breach of contract disputes for commercial and consumer installment sales (monthly payments) on autos, furniture, appliances, etc.
- Breach of contract disputes involving real estate brokerage services to home sellers and/or buyers.
Many of the specific sources above include arbitration clauses in their sales or other contracts. The link below provides discussion about such clauses.
Designing an Arbitration Clause:
Prior provisions for arbitration are usually binding arbitration. The only exception is where the recognition of binding arbitration would prevent a party from exercising a Constitutional right. For example, while arbitration usually can be binding and non-appealable, if the employee claims that discrimination has occurred, the courts will allow the employee to continue the case through the provisions of the Civil Rights Act, even if it violates the binding provision of the arbitration provision in the individual or collective bargaining contract.
Perspectives about the Arbitration Process, Benefits, and Liabilities.
The arbitration process first allows the party bringing the dispute to arbitration the opportunity to state a claim against the other party – that is, why the complainant (also known as the grievant, or the plaintiff) should be granted some benefit (payment by the other party, or for a specific action to occur or to be revoked, etc.). The other party (known as the respondent, or defendant) is then given an opportunity to present his or her side of the dispute. Both parties can supplement their explanations with relevant evidence. While the strict rules of evidence are not followed, the arbitrator may decide to exclude irrelevant or immaterial evidence. After each party has presented its side of the dispute, and after the arbitrator has had an opportunity to ask each party any questions that the arbitrator believes will help him or her better understand the situation, the arbitrator will render a decision, either granting the plaintiff/complainant the remedy that the party demands, or agreeing with the defendant/respondent, and denying the relief. On occasion, and depending on the contract or statute that created the arbitration of the dispute, the arbitrator may make a partial award, granting some, but not all, that the plaintiff/complainant requests.
The following link provides an overview of the arbitration process in a five-page discussion of the Arbitration process and the advantages and disadvantages of arbitration: Click Here
The following link discusses arbitration from an additional perspective.
Legal Advice for Free – Arbitration. (Click Here)
Conducting the Arbitration hearing
Because arbitration can arise from statute, contract or judicial order, and can occur relating to a subject matter that includes vehicle purchases, employment, contract dispute, securities and investment dispute, and a myriad of other areas, the procedure of the hearing may vary substantially.
The parties in arbitration will typically have at least a few weeks notice of when and where the arbitration will take place.
The parties will meet at the designated location, and will likely sit on either side of a conference table, with the arbitrator sitting between them at the head of the table. There will likely be a digital tape recorder or perhaps a video camera recording the meeting. In some situations, the arbitrator will arrange for a court reporter who will record the verbatim transcript, although it’s more common now to use digital recorder or video camera, with the understanding that if a written transcription is later needed, it can be developed from the audio or video record.
The arbitrator will have some preliminary paperwork for the parties to sign, and that will typically include an agreement to arbitrate, and an agreement to keep confidential the proceedings of the arbitration. What that means, simply, is that a party can’t come back later and say, “Well, in arbitration, you said you’d pay me $5,000 to settle my claim”, or something like that. The facts of the case can always be discussed – in the arbitration, or later in court if necessary.
Depending on the type of arbitration, and particularly in employment arbitration, the arbitrator may ask the parties if there is a “last chance” for them to come to some agreement, and if the parties want to talk about it, the arbitrator will leave the room to allow them the opportunity for private discussion. For purposes of illustration, we’ll consider a case of discharge of an employee who is represented by a union.
The arbitrator will commence the arbitration by reviewing and reciting for the record the claim made by the party initiating the action. For example, the arbitrator will state the name of the grievant – the employee who has been discharged – along with the name of the employer, the offense for which the grievant was discharged and the union that has jurisdiction in the bargaining unit to which the discharged grievant belongs.
After that opening, the parties will be allowed to make an “opening statement” – each party can tell his side of the story. This is the time when the preparation of the parties will best pay off. The opening statement allows a prepared party to demonstrate how he or she meets all the requirements to obtain the desired outcome – the legal or contractual remedy that is sought.
Usually, the party bringing the complaint to arbitration will speak first. In an employee discharge case, the union’s attorney or non-attorney advocate will often open the arbitration by presenting the facts of the case, explain what action was taken against the employee, and specify the wording in the relevant section of the Collective Bargaining Agreement (CBA) that governs this specific circumstance.
For example, if the employee is being discharged for repeated violation of safety rules, the grievant’s advocate will explain how the facts in this case do not meet the requirements to justify the discharge of the employee. If the requirement for discharge is that the employee must have been found in violation of safety rules on at least two previous occasions, the union advocate for the grievant might point out that yes, there were initially two prior occasions, but that after the facts of the second occasion were closely examined, management agreed to withdraw the charge of violation of safety rules. So now, there is only one remaining violation of safety rules, and that is not sufficient to meet the requirement that there be two prior occurrences of violation of safety rules.
The opening statement can be either chronological or presented in a way to “check off” the requirements to win the arbitration.
The grievant’s representative may ask to present a witness to testify about the second charge of safety rule violation being thrown out. If the arbitrator agrees, the witness may come in. It might be the union steward who handled that case in the local office, and she may testify that yes, the employee was initially for violation of a safety rule, but that the facts later showed that there was no violation, and the charge was dismissed against the grievant. The union steward may be able to bring in through her testimony a copy of the agreement signed by the union steward and the management representative that clearly shows the charge was dropped.
After the grievant’s representative has the opportunity to present his side of the story, the representative of the employer can attempt to refute any of the factual evidence. For example, he or she can argue that the second offense was thrown out on a minor technicality, and there was no question that the grievant had violated a safety rule a second time. The employer’s representative may argue that the requirement is that the charge demonstrate two occurrences, and these were demonstrated. The fact that it was thrown out on a technicality – like the supervisor not signing on both copies of the report – is not relevant to the fact that the grievant had committed a second violation of safety rules.
The discussion may go back and forth, and the arbitrator may ask additional questions.
In most cases, documentary evidence will be useful evidence. In some instances, a party may bring a witness who can testify, but the party should obtain the permission of the arbitrator before arranging for witnesses. In many arbitrations, the parties or their attorneys will exchange lists of witnesses, etc.
Following are some links to web sites for the more common complaints in which arbitration arises.
Arbitration of Employment Disputes, including EEO Disputes
If an employee finds himself in arbitration without such counsel, extreme caution is advised. The arbitration proceeding is “on the record”, and if the employee decides to proceed into arbitration without competent advice, he or she may be stuck with the outcome.
Note most importantly – because the employee, through the union, signed a collective bargaining agreement that authorized final and binding arbitration, the employee usually does not have an appeal of the arbitration award to the court system.
One exception occurs when the arbitration involves claims of discrimination. In those cases, the employee can elect to take the case to court to enforce anti-discriminatory behavior by the employer. This is discussed further in the following link involving an employer – Waffle House.
EEO Policy Statement on Arbitration – Following the Supreme Court Waffle House Case.
New workers may be asked to sign an agreement to arbitrate, and the following site is relevant: (Click Here)
Arbitration of Disputes under Collective Bargaining Agreements
Most employment dispute arbitration arises in situations where the employee is represented by a union. In those cases, the employee is counseled by the union arbitration specialists.
Many unionized employees work for government agencies. As a result, there are two levels of complexities in such arbitrations. The first is that the arbitration is governed by a complex union-management agreement. The second is that there are government-employer issues that also have to be addressed.
As an illustration of the complexity, consider these requirements that are typical for government employee unions (THIS IS JUST A SAMPLE – NOT ACTUAL)
- An employee must file a request for arbitration within 10 calendar days of receipt of an adverse step 3 decision.
- However, if the step 3 decision involves a claim of violence, depredation, theft or conversion, the employee must file within 21 days. Failure to file waives the employee right to arbitration.
- Witness lists must be provided to the arbitrator and opposing party within 10 days after the date and time of arbitration is set.
- Employee defenses to the charge must be made in pre-hearing briefs, and new issues will only be allowed at arbitration if there was new evidence that prompted the issue after the pre-hearing briefs have been filed.
Signing an Arbitration Agreement With Your Employer | Nolo.com
Many employers ask employees to sign arbitration agreements, in which they give up their right to sue in court over job-related issues such as wrongful …