Middletown Business Lawyers: Arbitration Agreements

What is Arbitration?

Arbitration is an alternate form of dispute resolution.   In arbitration, a party may file their claim with a private arbitration company, such as American Arbitration Association (AAA) or JAMS, Inc.  The party does not file a case with the Courts of New Jersey.  Instead of a trial of peers, arbitration involves a review and determination on the outcome of the matter by either an individual or panel of arbitrators. Like a trial, each side will have the opportunity to present their case.  A determination will be reached by the arbitrator or panel which will be binding on all parties.  The dispute cannot then be brought in court.  It is fully and finally resolved through the arbitration process.

What do you need to know about arbitration agreements?

While you may not believe arbitration or litigation may be necessary when you become employed, purchase a product or service, or sign a contract, it is important to understand what signing an arbitration agreement means.  If you have signed an arbitration agreement and ultimately need to sue someone, you have waived your right to a jury trial.  This means that even if you would like to bring a case in state court, you are not allowed to by operation of the arbitration agreement.  In the event you attempt to bring a claim in the Courts of New Jersey, the opposing party can make a motion to enforce the arbitration agreement, and will likely be successful. It is important to consider the pros and cons of arbitration before signing an agreement, and waiving away the right to a jury trial.

Pros of Arbitration

Many people like arbitration because it is much faster than the New Jersey Court system. There are many more arbitrators through private arbitration companies than there are judges in the State of New Jersey.  Additionally, there are not as many cases brought through the arbitration process as there are through the state court system.  Accordingly, the arbitration process as a whole is much more streamlined and efficient than the public court system.  

Arbitration is also much more straightforward than litigation.  Discovery rules tend to be narrower in scope, and evidence rules are more relaxed.  Motion practice is more simplified and does not involve the time-consuming paperwork often seen in litigation.  

Finally, arbitration is confidential.  The proceedings in arbitration do not take place in state court and transcripts do not become public record.  The names of parties and companies are kept out of the limelight, and the stress and anxiety associated with litigation is thus often reduced when nothing is made publicly available.

Cons of Arbitration

Arbitration is extremely expensive.  While arbitration may be more efficient than the litigation process, the costs add up quickly.  The filing fees of a claim, motion, and other arbitration tools are far more expensive than those necessary in state court.  Additionally, the parties have to pay for the time of the arbitrator or arbitration panel.  This usually involves paying an hourly fee which can be substantial in nature, and compound through motion practice and the final arbitration itself.  

As is clear from the name, arbitration is also arbitrary.  Rather than a jury of your peers, parties are evaluated by an individual or a panel who may or may not have a background in the law or a thorough understanding of the laws involved in the case.  Companies favoring arbitration may have more knowledge and experience with particular arbitrators, and fairness is a legitimate concern.

Arbitration can often be inconvenient as well.  State courts allow parties bring a lawsuit in the county in which they reside.  Many arbitration proceedings occur in metropolitan locations such as New York, NY or Philadelphia, PA.  It can be time-consuming and impractical for the parties to travel to these locations for arbitration and motions.  

Arbitration Agreements and Employment

Many employers provide their employees with arbitration agreements as a part of their initial intake paperwork when the employee commences employment. Employees should be weary of this blanket method of obtaining assent to an agreement.  Employees should be on the lookout for documents or language referring to “arbitration” or “arbitration agreements.”  Often, an employee does not even realize he or she has signed an arbitration agreement. Arbitration agreements waive an employee’s right to a jury trial, and thus should be reviewed with caution.  If you are given an arbitration agreement, first ask for the opportunity to speak with an attorney before signing the agreement.  Having an attorney review the agreement is a good way to determine whether the agreement is valid and enforceable in the event litigation may be necessary.   While it is always hopeful that an employee may never have to bring a lawsuit against his or her employer, it is important that an employee’s right to a jury trial is protected.

The Middletown business lawyers at McOmber McOmber & Luber, P.C. have years of experience in reviewing contracts and agreements. With offices serving Middletown, NJ and Marlton, NJ, McOmber McOmber & Luber, P.C. can provide a client with skilled guidance and feedback regarding his or her arbitration agreement.  Contact us online or call our offices at 732-842-6500 today.