What is Employment Arbitration?

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  • Written By: Sherry Holetzky
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 November 2019
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As with other types of mediation, employment arbitration is a method that can be used to resolve various disagreements. It may be utilized for several purposes, such as obtaining more employee benefits or settling a contract dispute. In some cases, it may be used by the employer to justify demoting or terminating an employee, once due process has been satisfied. There are many other issues that may be resolved via this method.

Lawsuits can be very time-consuming and expensive, so some companies attempt to use employment arbitration in place of court intervention. Even if outside legal advice is necessary, it may still be more cost-effective to utilize arbitration. There are an assortment of other reasons for doing so as well, including the ability to keep such matters more confidential.

Court cases become part of the public record unless sealed by a judge. Employment arbitration records may be less public, if not completely confidential. This is one of the issues contested by opponents.


Many times, employees cannot afford the cost of hiring an attorney and pursuing litigation, so they will agree to employment arbitration to seek a resolution. If the mediation is fair and impartial, the parties may be able to reach a reasonable compromise. If internal arbitration is used, the rules may be written in ways that favor the employer. An objective, outside source for alternative dispute resolution would seem fairer and would perhaps lead to greater success in arriving at an acceptable settlement.

Some companies actually require employees to agree to participate in enforced employment arbitration rather than taking possible disputes to court. Such stipulations can be included as part of a pre-employment contract. Acceptance may be mandatory before a person will be hired. While it generally makes sense for a company to offer employment arbitration, there are those who contest forced acceptance.

Potential employees need to educate themselves on the particular processes and sources used by the company for employment arbitration. Ensure that the methods are fairly designed and the mediators are impartial before signing such an agreement. It is also wise to consider whether such an agreement is prudent to begin with when a dispute has yet to arise. There is no real way of determining in advance whether the nature of an employment dispute is something he or she would be comfortable settling in the conference room instead of the courtroom.


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