Mandatory Arbitration Clauses

Patrick Moore

Aug. 5, 2021, 10:59 p.m.

...

You can find mandatory arbitration clauses inside many contracts. Their purpose is to prevent a dispute from heading toward a judicial court. Many employers apply mandatory arbitration terms to their employees. That’s because tons of employers want conflicts to get solved through arbitration. Visit also Arbitration Agreement or Contract .

Through the arbitral process, neutral arbitrators review the presented evidence. Then, the arbitrators make a final decision with legal binding status. Say that arbitrators decide that one party owes the other party money. That sum of money refers to the “arbitration award.” Please continue reading to learn more about mandatory arbitration clauses. Visit also Final Offer Arbitration .

Many Employers Use Mandatory Arbitration Clauses

The majority of employers prefer mandatory arbitration. Why? Because arbitration is less expensive than US court proceedings. That’s why employers create clauses for mandatory arbitration. They place them inside each Employment Agreement. Or, they can get featured in a separate Arbitration Agreement. Employees should take the time to read and understand each clause. This involves reading an entire mandatory arbitration agreement. Again, you might find one in an Employment Agreement. What is Arbitration Decision Process ?

Remember that no contract can prevent an employee from addressing certain claims. Here is an example. An employee can submit any claims to a prosecutorial agency. Many employee claims go to the US Equal Employment Opportunity Commission. But an agreement sometimes provides mandatory restrictions. It can prevent workers from sending a claim to an administrative agency. An example of this type of agency is your state’s Labor Commissioner. Let’s now go over the basics of arbitration. Know about the Advantages of Arbitration .

What Is Arbitration?

Arbitration functions as a type of ADR: alternative dispute resolution . This is where a neutral third party hears both sides of a dispute. Then, that third party (the arbitrator) makes a binding decision. Think of the arbitration process as the alternative to binding lawsuits. Mediation is another type of alternative dispute resolution. It involves the parties discussing each issue with a neutral mediator. The mediator assists the parties in creating an agreement. But mediation is never binding. Arbitration almost always is. Also check Binding Arbitration Agreement .

The Benefits of Arbitration

Arbitration saves a lot of time and money compared to court litigation. Arbitrating parties have a greater level of control over who the arbitrator is. Many parties can find an arbitrator trained in the area of the dispute. Say that the dispute concerns employment agreements. The parties can find an arbitrator with employment agreement experience. There is also alack of formal preliminary legal work. This applies to discovery, depositions, and more. Why is this so important? Because it leads to significant savings for many disputing parties. Plus, a party does not have to hire the services of a lawyer. This can result in even more savings for the parties in a dispute. Check out Arbitration vs Litigation .

What Is Mandatory Binding Arbitration?

Mandatory binding arbitration functions as a contract or agreement provision. It ensures that the parties resolve contract disputes in a private, mandatory manner. The parties go to hearings presided by an arbitrator. This replaces the act of litigating through the US court system. Mandatory binding arbitration sometimes involves parties having to waive specific rights. The most important right that gets waived is the ability to appeal a decision. Learn about Arbitration Provision .

START REGISTRATION +1 866-477-0707

Understanding the Process of Mandatory Binding Arbitration

Think of arbitration as a unique form of a legal settlement. The parties have already signed a contract or agreement. A clause in the contract will enforce mandatory arbitration. This way, parties agree to get their case reviewed by a neutral third party. But that third party in the arbitration is not a courtroom judge. Mandatory binding arbitration refers to parties using the services of an arbitrator. The parties must accept an arbitrator's judgment. Check out Full Scale Arbitration Services .

Say that a party with a contract thinks the other party hasn't upheld agreement terms. That party can have the right to seek damages through US court. Say that the case does not get settled before reaching court. The court system can award a plaintiff certain monetary damages. But the court must find that the defendant failed to follow terms of the contract. Know about the Types of Conciliation .

Recent Supreme Court & Legal Decisions Affecting Arbitration Clauses

Supreme Court cases in recent years upheld mandatory binding arbitration clauses. An example of this is the American Express court case of 2013. Companies can place mandatory binding arbitration clauses into agreements. They can do so with other companies or consumers. Fast forward to May of 2018. That’s when the Supreme Court made a key arbitration-related ruling. It announced that companies can use arbitration clauses for a certain key action. It’s to stop employees from filing class-action suits. These are lawsuits against employers that relate to employment issues. Congress has attempted certain legislative actions in the last few years. But most of the arbitration-related actions have not become the law. Must visit Insurance Arbitration .

Many US government officials want to make the arbitration process fairer. That fairness applies to both employees and consumers. There are different pending versions of the Arbitration Fairness Act. These proposals have gotten submitted to Congress. But, so far, none of the measures have gotten enacted. There is also the federal Forced Arbitration Injustice Repeal (FAIR) Act. It passed through the House of Representatives in September of 2019. It is now pending in the US Senate. The act would ban pre-dispute forced arbitration . It would get rid of provisions preventing people from taking part in class actions. Will any of these mandatory arbitration measures become the law? Only time will tell.

Common Concerns About the Forced Arbitration Clauses of Consumer Contracts

Many people take issue with forced arbitration clauses in consumer contracts. (This also refers to mandatory arbitration clauses.) Any consumer can get forced to agree to the terms of an arbitration clause . This contradicts the original purpose of arbitration. That purpose was that arbitration is always agreed upon in a mutual manner. People who agree to a forced arbitration clause give up the right to sue. But that’s not all. They also lose the right to file a class action lawsuit. Consumers cannot appeal a decision that an arbitrator puts in place. Many consumers are not even aware of a clause for arbitration inside a contract. (Or, inside almost any agreement related document.) The solution is to go clause by clause and read each arbitration section. Must visit Arbitration vs Mediation vs Litigation .

Sometimes a company will select and hire a certain arbitrator. This makes people feel like an arbitrator almost works on behalf of a company. Consumers often have little control over the arbitration time frame. Or, the location where the arbitration takes place. Of course, every arbitration clause is different. Companies can word their clauses in unique ways. Here is an example of drafting a clause for arbitration. Sometimes a company wants to have the option to sue a customer. But that doesn’t mean a customer has the option to sue the company.

Say that a consumer desires representation by an attorney. That consumer might have to compensate the lawyer on a per-hour basis. This is a problem because many consumers prefer using a retainer. Consumers do have the right to opt-out of arbitration agreements . But a company can refuse service to that customer. This often happens when a consumer doesn’t agree to arbitration. Check How To Use Arbitrate in a Sentence .

Are Mandatory Arbitration Clauses Legal?

Yes, mandatory clauses for arbitration are legal across the US. But the conditions vary state to state. Here is an example. In 2019, California put AB 51 into law. Some say this state law serves as a ban on some mandatory arbitration agreements. The law bans companies from resolving certain employment claims. This applies to the legal concept of forced arbitration. Check out Arbitral Tribunal .

START REGISTRATION +1 866-477-0707

What Is a Forced Arbitration Clause?

Say that an employee or consumer signs a forced arbitration agreement. That consumer or employee must submit a legal dispute to binding arbitration. This functions as a condition of employment. Or, a condition of buying a product or service. The consumer/employee waives the right to sue through the forced arbitration clause. That person cannot appeal a decision or take part in a class action lawsuit. You can find arbitration clause after clause featuring these legal demands. Must visit Federal Arbitration Act .

Can You Sue if You Signed an Arbitration Agreement?

No, you cannot sue an employer (or someone else) in the court of law. This applies if you have signed an arbitration agreement. Arbitration functions as an alternative dispute resolution technique. It serves as the number one alternative to filing a lawsuit in US court. This way, a party with a mandatory clause for arbitration can avoid standing before a judge. Check out 4 Types of Arbitration .

Our Firm Can Help You Create Sample Clauses for Mandatory Arbitration

Do you need help creating a clause for arbitration with mandatory status? If so, our arbitration professionals are here to help. They have years of experience drafting sample documents. Each document could help protect the financial safety of your company. Sure, we’re not a team of lawyers. But we have more law and court information than any other arbitration organization. Our team can go law by law to ensure your clause functions well. Visit Interest Arbitration Services .

You can't risk the court of law saying your mandatory agreement or clause isn’t valid. That’s why our law minded arbitration experts help people draft agreements. We’re in a class of our own when it comes to arbitration. Our organization has led the legal industry for many years. We know all about arbitration with mandatory status. And we’re ready to share that legal knowledge with you right now. So, let us know what law related documents you need. We can create custom clauses with mandatory status for arbitration. Visit Pre Dispute Arbitration Clause .

Contact Us To Learn More About Arbitration Clauses With Mandatory Status

Want to know more? Contact us: Arbitration Agreement Association . Our law-minded experts are ready to give you more information about arbitration clauses. All you've got to do is email us or message us on our website. You can also give us a call any time at (844) 554-0444. Our arbitration team can supply you with legal clause information ASAP. This way, your business can protect itself from going to court. When it comes to arbitration, our legal services have no limitations. And we’re ready to prove that to you right now.