Arbitration

Disputes in the workplace can often be resolved outside of the courtroom. By doing so, an employer can save time and resources for their business. 

Arbitration is arguably a  most favoured form. The entire process is generally cheaper, less formal, and more flexible than other resolution processes. Compared to litigation in courts, arbitration awards are generally actioned faster. Making it one of the most preferred alternative dispute resolutions.

We’ll look at how both the employer and employee solve their grievances through arbitration proceedings. We can also show why you should choose arbitration over other ADR methods.

What is arbitration?

Arbitration is a form of alternative dispute resolution. It involves an impartial third party who decides on a conclusion.

The main aims for arbitration are unbiased conclusions and independence from judicial courts. Compared to other forms of ADRs (like mediation, conciliation, and negotiation), arbitration is widely favourable. 

The Arbitration Act 1996 regulates arbitration in the UK and allows arbitrators to conduct hearings. Arbitration can settle disputes in employment, trade unions, or for individual disputes.

In recent years, businesses have applied mandatory arbitration within dispute resolution policies.

We can define arbitration as:

• Voluntary - both parties choose arbitration. The procedure is seen as less stressful compared to tribunal courts.
• Mandatory - it is legally required to go through arbitration. This could be because of a business policy or clauses written in contracts.
• Compulsory - this is where both parties are required to accept arbitration, with no room for negotiation. This could be because of safeguarding reasons, or affects to public interest.

The role of the arbitrator

Once an arbitration submission is processed, neither party can withdraw. Both must nominate an arbitrator to judge the procedure. The arbitrator should be impartial and have no professional or personal connections with anyone.

They will hear both sides of the dispute at a hearing or ‘arbitral tribunal’ and encourage collaborative communication. In the end, they will pass a final decision for the dispute.

Even though an arbitrator does not need specific qualifications, they should have some legal knowledge on proceedings and technical matters.

Arbitral hearing

The arbitral hearing can operate with either one arbitrator or as a panel of three. Any decisions made by the arbitrator are legally binding (similar to judicial passing).

Before the hearing, both parties should send their written statements to each other, and to the arbitrator. This ensures that everyone involved has access to all supporting documents. 

During the hearing, the arbitrator will ask each side to state their case, allowing each side to: 

• Express their statements without
• Ensure everyone understands all the issues presented.
• Present a summary statement to the case.

Once the hearing has ended, the arbitrator will document their ‘award’. Neither party may reject the award once it is written. Arbitration law states that the process is not legally binding but is ‘binding in honour’.

Advantages and disadvantages of arbitration

You should choose arbitration methods over alternative dispute resolutions because of:

• Flexible costs: it’s significantly inexpensive compared to procedures like litigation. Both parties can use free ACAS arbitration conciliation.
• Voluntary arbitrator: both parties can choose an arbitrator to resolve their dispute.
• Completely confidential: all disputes brought into arbitration are privy to privacy legislations and not made public.
• Legally binding: the award stands legally and can be enforced quickly, unlike court verdicts which can take extensive amounts of time to pass decisions.
• Bring workplace disputes to an end: arbitrations proceedings can be less time-consuming compared to litigation hearings.

Despite being a more favoured process, the disadvantages for arbitration can present barriers.

• Mandatory arbitration policies (written in a business policy or contract) waiver any further rights to appeal decisions.
• Arbitration does not allow appeals for interlocutory applications or injunctions. 
• The arbitral awards are not necessarily enforceable and are subject to judicial sanction.

Adjudication vs arbitration

We often refer to adjudication as a “pay now, argue later” procedure. Adjudication is normally used to settle construction disputes. For example, it can protect against payment withheld between businesses. Or to challenge difficult construction clauses.  

The difference between arbitration and adjudication   

• An independent party adjudicator passes verdicts, compared to a singular arbitrator.
• An adjudicator's final decision is enforced without a right to appeal. However, their decision can be revised through arbitral hearings or by litigation. 
• Adjudicators cannot award costs to parties (only their own fees). Arbitrators can order compensation payments to be paid.

The main differences between arbitration, mediation, and litigation procedures

The main difference between mediation and arbitration is that an arbitrator hears evidence given by both parties and decide. In a mediation proceeding, the decision is negotiated between both parties with the assistance of the mediator. 

Litigations is chosen for more consequential disputes. Like contract breaches, harassment, and whistleblowing. That’s why such disputes are discussed in a court setting, rather than through some ADR methods.

Mediation vs Arbitration

• Both resolve disputes independent of the court system.
• Arguably the most cost-effective methods of ADR.
• Procedures can be shorter timewise, compared to other tribunal cases.
• Both are easier settings for individuals who are unfamiliar with legal tribunals.
• Both are inexpensive procedures, as judges are sometimes volunteers, or charge next to no fee.

Litigation vs Arbitration

• Judicial courts are used for litigation claims; arbitration settlement can done independent of courts.
• Arbitration methods use an impartial individual for decisions. As litigation stands as a legal process, it must include all sides of the judiciary to resolve disputes.
• Arbitration generally deals with civil cases, whereas litigation deals with both civil and criminal cases. 
• Legal costs are a significant difference between arbitration and litigation. Litigation procedures are expensive to use, as costs can quickly escalate during cases.

Get expert advice on arbitration  with Peninsula

It’s important to have the best policy for settling disputes in the workplace. Having a strong arbitration business policy can minimise effects on business productivity and concentrate on workforce wellbeing.

Our team can help you with workplace disputes and arbitration proceedings that fit your business. Our document specialists can also provide guidance on how to write a letter of arbitration for dispute settlements.

Peninsula clients get access to 24/7 HR consultation with our employment specialist. And if you’re not yet a client, you can still enjoy free advice from one of our business experts. Simply call us on 0800 028 2420.