Arbitration

Many employers require their employees to sign something that is called an arbitration agreement. By signing this agreement, the employer and employee agree that the employee will go to arbitration (instead of court) if he believes his rights are violated.

Arbitration is an alternative to litigation through the court system. The general principle of arbitration is a fair resolution of disputes by an impartial third-party. In arbitration an independent third party decides who wins and who loses. This person is called the arbitrator. The arbitrator’s decision is usually final and binding on the parties.

In a word: yes.

In arbitration, you can bet that your employer will have a lawyer. It is that lawyer’s job to best represent his client---your current or former employer. For the company, that means the goal is to give no money to you and to admit no fault. It also means that they will likely fight you at every step of the arbitration---which include appointment of an arbitrator, preliminary meeting, statement of claim and response, discovery period (where both parties turn over relevant information to each other), legal briefing and motions, the arbitration hearing, and the arbitrator’s decision. Needless to say, this can be very complex.

There are a number of advantages to arbitration. One advantage is efficiency, as usually arbitration takes a shorter amount of time than going through the judicial system. A second advantage is privacy, as arbitration hearings are confidential and private. This is helpful because both sides make not want certain information available to the general public. A third advantage is flexibility. Unlike the sometimes rigid structure of the court system, arbitrations can often be more flexible when it comes to timing and formalities.

One major advantage (and disadvantage) to arbitration is that there is generally no right to appeal. If the arbitrator decides a case and one party believes that the decision is wrong, it is nearly impossible to reverse or overturn the arbitrator’s decision. This can be great if you win an arbitration and extremely frustrating if you lose. Other disadvantages include costs, lack of a jury, and what is known as “splitting the baby.” Unlike the Court system, where parties do not pay for the time of the judge, arbitrators can be very expensive. Sometimes the minimum fee for an arbitrator can be thousands of dollars. However, fortunately, the employer often pays for the cost of the arbitrator.

Of course, even when the employer pays for the arbitration, they are also paying to avoid the court system and having your case heard by a jury. This is often viewed as being beneficial to a company because the person making the decision is often seen as favoring the employer (though not necessarily true) or as someone who will “split the baby” in his decision. This means that the arbitrator will give both sides a little bit of what they want but not everything. This will sometimes cause parties to feel as though the process was not fair and that justice was not served.

In forced arbitration, a company requires an employee to submit a dispute to binding arbitration as a condition of employment. The Tennessee Supreme Court stated in Benton v. Vanderbilt Univ., 137 S.W.3d 614 (Tenn. 2004), “In general, arbitration agreements in contracts are favored in Tennessee both by statute and existing case law.” It is rare that a Tennessee court finds that an arbitration agreement (whether signed as a condition of employment or not) is unenforceable.

An unconscionable contract is one in which the provisions are so one-sided, under all of the facts and circumstances, that the contracting party is denied any opportunity for meaningful choice. Determination of unconscionability focuses on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the existence of unfair terms in the contract. To determine unconscionability, Tennessee courts must decide on “(1) procedural unconscionability, which is an absence of the meaningful choice on the part of one of the parties and (2) substantive unconscionability, which refers to contract terms which are unreasonably favorable to the other party.” Further, the party seeking to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive bears the burden of showing the likelihood of incurring such costs.