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What You Should Know Before Implementing A Mandatory Arbitration Agreement For Your Business

What You Should Know Before Implementing a Mandatory Arbitration Agreement for Your Business

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What You Should Know Before Implementing A Mandatory Arbitration Agreement For Your Business

When you pour your time, hard work, and money into a business, you want to protect your investment in the best way possible. Sometimes that may mean turning to mandatory arbitration to solve problems, instead of going through the traditional court system. There has been a growing trend among businesses requiring their workers to sign mandatory arbitration agreements.

How does mandatory arbitration work? It is simply a process that prevents a conflict from going to court and instead settles disputes using the arbitration system. The arbitration system allows a neutral third party to hear the arguments presented by both sides and then make a ruling based on the presented evidence. The outcome decided by the third party may be binding, and both parties must abide by the judgment.

However, there are things that a business’s decision-makers need to consider before implementing a mandatory arbitration agreement. Whether this type of agreement is right for your business may depend on several factors. Discussing your specific situation with an experienced North Carolina business attorney may be the best way to understand what binding arbitration may mean for your business.

The North and South Carolina business lawyers at Mullen Holland & Cooper P.A. can review your business strategy and help you decide if a mandatory arbitration agreement will help you achieve your goals. Connect with someone from our team today.

Implementing Mandatory Arbitration

Implementing a mandatory arbitration agreement can be difficult, and without careful wording, it may not be enforceable. When proper procedures are not followed, a court could consider an arbitration agreement “unconscionable” and therefore unenforceable if:

  • The cost of arbitration to the employee is too high
  • The employee and their employer are not equally bound by the agreement
  • The agreement is imbalanced in favor of the employer
  • The relief provided to the employee is significantly less than would be found through the court system

A business’s decision-makers should consult with an experienced business lawyer before attempting to implement a mandatory arbitration agreement. An attorney can review the substance of the agreement and brief the business on how to properly enter into the agreement with their employees.

Agreements generally need to include:

  • Which types of claims are covered
  • How much time a person has during which to file a claim
  • The process involved in filing and resolving an arbitration claim
  • How a neutral arbiter is selected
  • The party responsible for costs and fees associated with the arbitration
  • A “mutuality clause” laying out how both parties are bound by the decision of the arbiter

Benefits of Implementing Mandatory Arbitration

Mandatory arbitration offers several potential benefits to both the business and its employees. First, arbitration costs are typically low when compared to court costs. The process tends to be a much more cost-effective way of resolving disputes.

Arbitration is also typically a much faster process. Going through the court system can take months, sometimes longer, depending on the docket and how backed up the court is at the time. The process of arbitration is generally much shorter and can result in a quicker outcome than if the case worked its way through the courts. Arbitration also feels more informal than a court case. This informality can sometimes make both the employer and the employee feel more comfortable with the process.

Privacy may also be a concern for both parties. Court proceedings are very public. Details of arbitration claims can remain private and are not readily available as part of the public record.

How Mullen Holland & Cooper P.A. Could Help

Mandatory arbitration agreements are quickly becoming a popular way for businesses to protect themselves. Is that right for you? That may depend. Talking to an experienced North Carolina business attorney is the best way to determine if a mandatory arbitration agreement is right for your business. If you decide that it is, an attorney can also help you draw up an agreement that stands the best possible chance at standing up in court.

If you want to discuss mandatory arbitration in more detail, contact Mullen Holland & Cooper P.A. today. We want to help you bring out the best in your business.


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