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Should I add arbitration clauses to my employee contracts?

If your aim is to reduce employment disputes, arbitration clauses could offer a solution. As any Florida employer who has suffered an employee lawsuit can attest, employment-related claims can be both expensive and uncertain. Even in cases where the claims have no merit, employers must often shell out significant amounts of money to resolve the issue. Further, court actions are time-consuming and often stressful as well.

Many have turned to arbitration clauses as a way to prevent at least some employee-initiated lawsuits. Like a court action, arbitration is a formal legal process. It works like this: When employees and employers sign an employment contract containing an arbitration clause, they are giving their mutual consent to resolve disputes through arbitration. If an employment dispute does arise, them a neutral third party, or arbitrator, will hear both sides of the dispute and then make a decision.

Arbitration clauses are beneficial to employers for several reasons. Chief among these is saving money and saving time as the arbitration process proceeds faster than court actions. Additionally, the process affords employers a greater degree of certainty about the outcome because there are limitations to appealing an arbitrator's decision. Arbitration also provides employers with more privacy that they would have by settling the matter in court.

Employment disputes should never be underestimated by either party, and it is never wise to assume the dispute will be resolved quickly. Most business owners or employers seek attorney guidance when considering arbitration clauses. Working with a lawyer offers the opportunity to discuss the pros and cons of arbitration as well as defense options should an employment dispute occur in the absence of an arbitration clause.

Source:, "What Are the Benefits of Employment Arbitration?," Lynne MacDonald, accessed April 26, 2016

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