What If Your Employment Agreement Includes an Arbitration Agreement?

I would wager that most Virginians have heard of Arbitration. I would however, be surprised if more than 10% of Virginia employees knew what Arbitration really meant, when they signed a non-compete agreement agreeing all disputes will be handled in such a manner.

Arbitration is referred to in business and legal circles, as alternative dispute resolution. It basically means both parties agree they will not take advantage of the state or federal court system (in fact they often waive that right), but rather will have their disputes decided by an independent third party.

Under Virginia Code, § 8.01-577(A) Persons desiring to end any controversy, whether there is a suit pending therefore or not, may submit the same to arbitration, and agree that such submission may be entered of record in any court. Upon proof of such agreement out of court, or by consent of the parties given in court in person or by counsel, it shall be entered in the proceedings of such court. Thereupon a rule shall be made, that the parties shall submit to the award which shall be made in accordance with such agreement and the provisions of this chapter.

What does that mean in actual every day English? It means that in Virginia, any two parties can agree to waive their right to a jury trial, and submit all disputes to Arbitration. Both parties must agree however – and yes, an employment agreement written and signed by both employer and employees, entails such an agreement.

Normally, our firm preaches the gospel of anti-arbitration. In health care (Medical malpractice, nursing home abuse) scenarios, I generally think Arbitration puts plaintiffs at a disadvantage. My opinion however is different on employment agreements. When it comes to arbitrating employment agreements, I am a fan for many reasons (well – depending on the case).

What is the difference, practically, between arbitrating an employment issue, and having it heard by a judge or jury?

TIMELINE: In Virginia, getting an employment case heard could take 1 – 1.5 years in your local Circuit Court; Arbitration should be less than 1 year.

COSTS: In local Circuit Court system, only the plaintiff pays money to file the suit; under most Arbitration associations, both sides have to “pay” the arbitrator throughout the process.

DECISION MAKERS: In Court, you have a trained judge who will ultimately make a ruling on a case and can be overturned by higher courts if he or she does not accurately apply Virginia law; in Arbitration, you only get to appeal of the arbitrator (usually just a lawyer) exceeded his or her powers.

DISCOVERY: In Court, there are formal rules to obtaining information from the other side; In Arbitration, you play by the rules of the “arbitration association” and may be limited in what information you can obtain.

PUBLIC v. PRIVATE: Almost every Virginia Circuit Court, keeps an online records of case so that members of the public can monitor cases, etc; in Arbitration, everything is private until the final determination. This essentially means in employment cases, you cannot know whether or not the contract has been held unreasonable in the past.

RIGHT TO REVOKE: You can always agree to arbitrate or mediate a claim after you have filed suit, but under Va. law you can only revoke an agreement to arbitrate “on a ground which would be good for revoking or annulling other agreements.” This means, unless the agreement was signed under duress, etc., you are bound by it.

Still have questions about what your Arbitration agreement means in your employment contract? Want to know how t the process will look and feel before you agree to such a clause? Any attorney who has experience in business or employment contract litigation can tell you about the process.

Better to know a little bit before you sign a contract waiving your right to access your local court. You can assume your employer knew about the process when he or she asked you to agree to it.