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Arbitration agreements are an essential component of employment contracts in California. These agreements are between an employer and employee in which both parties agree to resolve disputes through arbitration rather than going to court.
Arbitration is a process of resolving disputes outside of the court system, where a neutral third party, known as an arbitrator, listens to both sides and makes a binding decision. It is commonly used in various legal contexts, including employment and business contracts, as a quicker and more private alternative to litigation. Arbitration is less formal than a court trial, with streamlined procedures. While it can be a faster way to resolve conflicts, arbitration decisions are usually final and legally binding, with very limited opportunities for appeal.
Here is an overview of the steps involved:
Arbitration Agreement
The process usually begins when an employee has signed an arbitration agreement, often as part of their employment contract.
Filing a Claim
If a dispute arises, such as a claim for wrongful termination, discrimination, or unpaid wages, the employee (or their attorney) files a claim with the arbitration provider specified in the agreement, such as the American Arbitration Association (AAA), Judicial Arbitration and Mediation Services (JAMS), or the Financial Industry Regulatory Authority (FINRA).
Selecting an Arbitrator
Both the employee and employer typically have a say in selecting the arbitrator, who will act as a neutral decision-maker. The arbitrator may be chosen from a list provided by the arbitration organization or based on mutual agreement.
Preliminary Hearings
Before the actual arbitration hearing, preliminary hearings may be held to discuss procedural matters, such as deadlines for submitting evidence, motions, or any pre-hearing issues.
Discovery
While arbitration has more limited discovery compared to court, both sides can still exchange some evidence, such as documents and witness statements. However, the scope of discovery is often narrower, which can benefit the employer.
Arbitration Hearing
The hearing itself is similar to a trial but less formal. Both parties present their case to the arbitrator, typically in private.
Arbitrator’s Decision
After the hearing, the arbitrator reviews the evidence and arguments and issues a final decision, called an award. This decision is binding on both parties, meaning they must follow it, and there is generally no appeal unless there are very rare grounds such as fraud or bias.
Enforcement
If the arbitrator rules in the employee’s favor, they may receive compensation or other remedies ordered by the arbitrator. If the employer does not comply, the employee can seek to enforce the award in court.
FINRA arbitration is a specific type of arbitration that applies primarily to disputes within the financial services industry. If you work in this sector—whether as a broker or investor—you may be required to resolve disputes through the Financial Industry Regulatory Authority (FINRA) rather than court proceedings. Investors or brokers may face a wide range of disputes that fall under the umbrella of FINRA arbitration, such as:
FINRA arbitration, while intended to streamline dispute resolution, can be daunting for employees. It is critical to understand that once you sign an arbitration agreement, you are typically bound by it and must pursue your claim through FINRA rather than in court.
Alternative Dispute Resolution (ADR) refers to a range of methods used to resolve disputes outside of traditional court litigation, including arbitration. ADR is a key component of California’s approach to managing employment disputes, offering options that are often quicker and more cost-effective. In addition to arbitration, employment contracts often call for mediation.
Mediation involves a neutral mediator who helps the parties negotiate a mutually acceptable solution. Unlike arbitration, the mediator does not make a decision and only facilitates discussion to resolve the dispute. Mediation is often preferred when both parties want to maintain a relationship or reach a solution collaboratively.
Navigating arbitration agreements and procedures in California can be complex, and employees may feel disadvantaged or overwhelmed. An experienced Orange County Employment Attorney can provide critical assistance at various stages of the dispute resolution process. Here are several ways an attorney can help:
Reviewing Arbitration Agreements
Before signing an arbitration agreement, it is crucial to understand the terms and conditions. Many arbitration agreements are drafted by employers and may be biased in their favor. An attorney can:
Representation in Arbitration
A wrongful termination attorney in Orange County can represent you during the arbitration process. This includes:
Since arbitration is binding, having strong legal representation can be essential to achieving a favorable outcome.
Ensuring Compliance with California Law
California has unique protections for employees when it comes to arbitration agreements, including laws that prohibit employers from requiring arbitration of specific claims, such as those related to sexual harassment under the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” of 2022. An attorney will be familiar with these protections and can ensure that your rights are fully protected.
Litigation as an Alternative
If an arbitration agreement is unenforceable due to legal violations, an attorney can represent you in court. California courts are often more favorable to employees in certain types of claims, such as those related to wage and hour violations or discrimination, and an attorney can help determine the best course of action.