Arbitration Agreements and Your Business

  1. Business Law
  2. Arbitration Agreements and Your Business
Arbitration Agreements and Your Business (1
Business Law

As you run your business, conflict is inevitable, whether it is between you and an employee, a business partner, a supplier, or a customer or client. If your business becomes involved in a lawsuit, it all too often becomes time-consuming, stressful, and expensive. Fortunately, you have alternative dispute resolution options, such as arbitration, that may be useful in resolving legal disputes. As a result, incorporating arbitration agreements into your business contracts may be useful.

Having an Arizona dispute resolution lawyer available to advise you on your options and assist you through the dispute resolution process can be key to a successful outcome. Call Provident Law® at (480) 388-3343 to set up a time to talk with us about your options for resolving your legal business dispute.

Understanding Arbitration

During arbitration, a neutral third-party arbitrator the parties jointly select decides the outcome of your legal dispute. The arbitrator is typically a retired judge, attorney, or legal professional.

The arbitration process is similar to litigation in that each party to the dispute presents evidence and calls witnesses to testify. After hearing the evidence, the arbitrator makes a final decision. However, the procedural rules in an arbitration typically are more relaxed, and the arbitrator has more discretion to dictate the arbitration process instead of being required to follow court rules strictly.

Advantages of Arbitration    

As mentioned above, litigation can take months or even years to resolve, which takes up a great deal of time that you could and should be devoting to your business. In almost all cases, arbitration will likely resolve your case much more quickly than litigation.

Likewise, you will spend a great deal of money on litigation, whether you have initiated the litigation or are defending your business against a lawsuit. Although arbitration is not without cost, it will be less costly than litigation. Furthermore, you can control the costs by specifying the allocation of costs in an arbitration agreement.

When you engage in litigation, the party who loses the lawsuit always has the right to appeal the decision to a higher court. This right can extend litigation for years longer than you anticipated. In contrast, once an arbitrator issues a decision, it is final and binding on both parties. You cannot appeal the decision of an arbitrator.

Finally, lawsuits are public records that anyone can view. Members of the public also can attend hearings in court cases, and newspapers can report on lawsuit-related events. This type of publicity is often damaging to your business. However, arbitration is private and involves no public records of the proceedings. Therefore, arbitration can prevent the public from knowing about legal disputes involving your business. As a result, you can avoid negative publicity for your business.

Arbitration Agreements

Arbitration is not mandatory, so you cannot compel arbitration unless the parties agree. The easiest way to ensure an agreement to arbitration is to require parties to any contract with your business to sign either a stand-alone arbitration agreement or to include an arbitration provision in your business contracts. In any case, the agreement or provision must establish arbitration as the exclusive form of dispute resolution concerning any issues related to the contract.

The arbitration agreement or provision can include your desired level of detail, including how the parties must choose an arbitrator, who is responsible for paying the costs of arbitration, the required process for any arbitration proceedings, and the scope of any potential damages.

You should keep in mind that, in some instances, arbitration agreements are not permissible. For instance, on March 3, 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 went into immediate effect. This Act applies only to arbitration agreements between employers and employees. However, it eliminates all mandatory arbitration agreements for employees and employers concerning claims of workplace sexual assault and harassment. As a result, these arbitration agreements are now ineffective even if employees have already signed them. As a result, employers should review their standard employee contracts or related documents to determine if any updates are warranted.

Count on Us to Assist You with Your Dispute Resolution Needs

While litigation is sometimes necessary, dispute resolution may be a more efficient and effective means of resolving legal disputes in some cases. Contact the offices of Provident Law® today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona dispute resolution attorney about options for resolving your legal dispute.

Previous Post
Anticipatory Breach of Contract and Your Business
Next Post
Trade Secrets Act