Arbitration v. Mediation: Which Alternative Dispute Resolution is Best for Your Business?

In your business there may be times a dispute arises. Many think the only way to handle disputes with their employees is through the courts, but there are other ways to resolve a dispute. Trials can be extremely costly and time consuming. Thus, employers should consider using an alternative dispute resolution mechanism like arbitration or mediation.

 Arbitration

When disputes are handled through arbitration, the dispute is submitted to a third party (i.e., arbitrator) and a binding decision results. Arbitration usually occurs through mutual consent of the parties. While the arbitrator has control over the outcome, the parties choose the actual arbitrator, venue, governing law, timeframe of the proceedings, and procedural rules.

While, the process is usually less formal than a traditional trial, some aspects of a traditional hearing remain. Each party pleads its case to the arbitrator either pro se – representing themselves – or with legal counsel, and ex–parte communications – communications with the arbitrator outside of the presence of the opposing party – are generally prohibited to ensure neutrality of the arbitrator. Additionally, the arbitrator’s decision must be based on the law. However, unlike trials, there are no strict evidence rules, and the outcome of the arbitration is private unless there is court intervention.

Employers may choose arbitration as a dispute resolution because an employer can be certain that a settlement will be made at the end of the proceeding. However, an employer cannot be certain that the settlement will be in its favor because arbitration produces a win-lose outcome. As a result, sometimes arbitration can leave the losing party unsatisfied with the result. Thus, when deciding whether to choose arbitration, an employer should consider the possible effects the arbitration could have on its relationship with the opposing party.  Arbitration can ruin a relationship when both parties are not satisfied with the outcome. Thus, if an employer wants to continue to have a positive relationship with the opposing party it might not want to choose arbitration and perhaps consider mediation.

Mediation

When a dispute goes to mediation, a third party (i.e., mediator) helps guide negotiations between opposing parties. Unless it is court ordered, the mediation process is usually voluntary. The mediator is chosen by the parties and is a neutral, impartial party. The mediator’s role is to help the parties come to an amicable solution, but that solution is not binding. Because the solution is not binding on the parties, the parties are able to choose another dispute resolution mechanism if they are unhappy with the mediation’s outcome. Mediation is the most cost-effective dispute resolution option.

The mediation process is informal, and the parties have control over every aspect of the mediation. Like arbitration, the parties choose the mediator, the venue, timeframe, and location of the mediation. However, in addition to the aforementioned things, parties entering into mediation can choose to communicate with each other, or solely with the mediator. While the attorneys can be present during mediation, they are not the focus. Everything discussed during the mediation remains confidential, and the mediator cannot be compelled to testify as a witness on behalf of either party.

Employers may choose mediation because mediation focuses on finding a win-win outcome, rather than focusing on only one party winning. In doing so, mediation allows for more creative solutions that do not have to be grounded in the law. As a result, disputes tend to be resolved quicker using mediation. At the end of the mediation process, both parties tend to be satisfied. Thus, mediation is the best option if an employer wants to maintain an amicable relationship after the dispute is resolved. However, it must be stated that for any of this to occur, both parties must enter the mediation with good faith.

Employers should consult with an attorney to help guide them when deciding between arbitration or mediation. The merits of an employer’s dispute are sometimes quite complex. ELS attorneys can assist employers in the resolution of goals and assessment of disputes to determine which alternative dispute resolution is the best course for your business.

~Author: Antoinette Trott, 2018 Gate City Bar Summer Associate, Emory University School of Law, 2nd year Law Student