Some business owners in Tennessee might be under the impression that if they have a business dispute, their only option is to litigate the matter before a judge in a trial. However, the litigation process can be costly, both in time and finances, that the business could be using to better itself. Litigation can also have a negative effect on worker morale and could tarnish the business’ reputation. What business owners may not know is that not every dispute needs to be litigated. Alternative dispute resolution processes, such as arbitration, may be a possibility.
Through arbitration both sides to the dispute and their attorneys present their case to a neutral arbitrator. The arbitrator will then make a decision regarding the dispute. Unlike litigation, arbitration is not public and will not be heard by a judge or jury. Resolutions reached through arbitration are binding on both parties, meaning that it is not possible for a party to appeal the arbitrator’s decision.
Businesses often put arbitration clauses in contracts they have with employees, vendors or other businesses. Arbitration avoids the need for the parties to litigate every dispute, which may benefit both parties. Whether arbitration is appropriate depends on each party’s business needs and the terms of the contract itself.
Alternative dispute resolutions, such as arbitration, have benefits that are worth considering. However, they are not always the perfect answer to resolving a dispute. Sometimes, disputes do need to be litigated. While arbitration may be quicker and less costly than litigation, an arbitrator’s decision on the issue cannot be appealed. This is something businesses may want to keep in mind when drafting a contract that may include an arbitration clause. In the end, business owners will have to consider their business’ operations, finances, public reputation and more when deciding whether arbitration is right for them.
Source: The Logical Entrepreneur, “Are Arbitration Clauses Good for Small Businesses?,” Kate Leismer, Feb. 23, 2018