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ADR Part 2: Is an Arbitration Agreement Right for Your Business?

Employers are well-aware that California law heavily favors employees. For decades this meant an ever-growing number of employment related lawsuits placing a major burden on the court system and on businesses alike. In the 1990s, a number of new statutory rights for employees, including rights to jury trials and punitive damages further contributed to this increase in lawsuits. This seemingly endless growth in employment disputes in turn led to a trend, both in California and nationally, towards the use of Alternative Dispute Resolution, or “ADR.”

In general, ADR can be extremely beneficial to both employers and employees. ADR is much more time-efficient than traditional litigation. It can take years for a case to go to trial, while mediations and arbitration can usually be scheduled within a few months . ADR may also be less expensive, especially when it comes to attorneys’ fees (this is an added bonus for employers who frequently must cover the cost of a plaintiff’s attorneys’ fees in employee lawsuits if they do not prevail ). From a psychological and emotional standpoint, ADR can offer the opportunity for employers and employees to work together to agree to a solution, as opposed to feeding into the oppositional aspects of litigation; still, it can be challenging depending on the type and allegations of each case.

All that said, arbitration will almost always be more expensive than mediation and more costly overall to the Employer, since the Employer has to foot the bill for the employee. Recently, the California Code of Civil Procedure was amended to include language that requires the employer to pay arbitration costs and fees within 30 days of the due date where 1) fees or costs are required to initiate arbitration proceedings, or 2) fees or costs are required to continue arbitration proceedings. If the costs are not paid within 30 days, the employer will be considered to be in material breach of the arbitration agreement, meaning among other serious consequences, they have waived the right to compel arbitration.

Whether or not it makes sense to include an arbitration agreement for your company is ultimately a business decision. California continues to chip away at the benefits that employers might see from arbitration agreements, and because of this, it is always a good idea to consult with an attorney before you implement an arbitration agreement for your employees. For more information about whether an arbitration agreement makes sense for your business, please contact the Employer Lawyers at Chauvel & Glatt.

The material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes. For information on your particular circumstances, please contact  Chauvel & Glatt at 650-573-9500.


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