Is arbitration worth it?

Arbitration is an alternative dispute resolution process which allows parties to resolve disputes without going through the formal court process. In unionized workplaces, arbitration has long been the primary method for resolving contentious workplace issues. For non-unionized workplaces, however, arbitration has not historically been the norm, with parties instead seeking recourse through the civil courts or administrative processes, such as the human rights tribunal or ministry of labour complaints.

However, arbitration is becoming more common for non-union workplace disputes. Without some of the formalities associated with court litigation, it can be seen as a more flexible and time efficient way to resolve disputes. Before agreeing to proceed by way of arbitration, employers and employees alike should give careful consideration to the advantages and disadvantages of this alternative dispute resolution mechanism.

Employers:

The shift towards arbitration is largely employer driven. This is likely because arbitration offers a few clear benefits:

• Flexible and time efficient: The arbitration process is more flexible than court litigation. Parties have the freedom to schedule arbitration proceedings on their own timelines, which can result in the dispute being resolved much more quickly. Parties also get to choose their arbitrator and can select someone who has specialized expertise in the specific area of the law that their dispute pertains to, for example, an individual with human rights expertise.
• Simpler: Arbitration proceedings are not subject to the same rules relating to discovery and evidence as court proceedings. While the degree of complexity may vary depending on the nature of the issue in dispute, generally parties do not have to incur the time and cost dealing with some of the procedural issues that arise in court cases.
• Cost efficient: While parties do have to pay for the costs of hiring an arbitrator, the simpler process may mean there is less spent on legal fees and overall savings.
• Private: Importantly, arbitration proceedings are private. The arbitration decision will not form part of a public record, unlike court decisions. For employers looking to keep their names out of the public eye, this may be desirable.
• Finality: Arbitrator's decisions are typically binding, with limited routes for appeal. This means that once the arbitrator has issued a decision, it is likely to be the final word on the matter.

While arbitration undoubtedly can have its advantages for employers, it is not always a perfect solution. There are some drawbacks which should be considered before moving forward with arbitration:

• Contentious: A primary consideration is whether employees will agree to proceed with arbitration. This is far from guaranteed. Employers may try and pre-empt this by including a mandatory arbitration clause in their employment agreements, but there is no guarantee an employee will sign off on it. Even if they do, the enforceability of arbitration clauses can be questionable, and result in extra time and costs incurred in determining the issue of enforceability. For more on this topic, please see our prior blog post, Arbitration clauses in employment agreements.
• No guaranteed savings: Parties have to incur the cost of hiring an arbitrator to hear the matter. This can be costly, and typically the employer will at least have to pay for some if not all of the arbitrator's fees. In contrast, most court and administrative tribunal processes are free, aside from some filing fees.
• Not guaranteed to be faster: Mediation, either mandatory or voluntary, often occurs in the early stages of a lawsuit or administrative tribunal process. With a significant number of employment disputes settling at mediation, it is not guaranteed that arbitration will be a more expeditious way to resolve disputes.
• Lack of due process: While the flexibility of arbitration can be beneficial, it also brings with it concerns about fairness and due process. The strict rules of civil litigation exist for a reason after all. This is exasperated by the fact there are typically limited routes for appealing an arbitrator's decision.

Employers are encouraged to give some thought to whether arbitration is right for their workplace. In addition to the above factors, employers should assess their corporate culture, how mandating arbitration may be perceived by their employees, and the frequency with which workplace litigation occurs.

Employees:

Many of the advantages and disadvantages outlined above are also applicable to employees who are contemplating whether to agree to arbitration. The flexibility, efficiency, and cost-savings associated with arbitration may be appealing to employees. However, there a few additional considerations which employees should keep in mind before signing off on arbitration:

• Limited remedies: Arbitration clauses in employment agreements typically limit employees right to sue in court. Some clauses may attempt to go a step further and limit the remedies available to employees, such as the ability to claim punitive damages or legal costs. While it is questionable whether such provisions would be enforceable, employees may nevertheless have to incur extra time and cost arguing over the enforceability issue before they can even make a claim.
• Lack of due process: The lack of formality regarding documentary disclosure, oral discovery and evidence may be more harmful to employees. Employees who are taking legal action against their employers may not have access to all of the documents and information they need to prove their case, as such documents are held by the employer. The more stringent discovery and evidence rules applicable to civil litigation can be an important tool for employees to gain access to information and know the case they have to meet.
• One-sided: In some circumstances, the imbalance of power between employers and employees can skew the arbitration process in favour of the employer. Employers may be able to exert more control over the arbitration process, especially if the employee is unfamiliar with arbitration proceedings.

Conclusion:

Arbitration can be a useful mechanism for resolving disputes. However, whether it is the most appropriate mechanism for resolving disputes in your workplace may depend on the particulars of your work environment. Fortunately, arbitration does not have to be an all or nothing solution. Employees and employers may elect to have certain kind of matters proceed by way of arbitration and others not, or assess whether to proceed with arbitration on a case-by-case basis. Either way, employers and employees alike should seek legal advice before agreeing to arbitration. Lee Workplace Law would be happy to answer any questions you might have.