Question

Assume that you work in the human resources department of XYZ Corporation (“XYZ”). Your supervisor, Jane Smith, informs you that XYZ is considering implementing an arbitration clause in its employee handbook. Since you are studying business law at , she asks you to write a memo to her summarizing the following:

1. The (general) pros and cons of arbitration for businesses; and

2. How an arbitration clause in an employee handbook (or an employment contract) should be drafted in order to be binding and enforceable. In other words, what should the company include in the language of the clause? What types of provisions or language should they avoid?

Answer 1

a) Arbitration is a process where the disputed parties agree that more than one individual can make the decision after hearing and evidence verification just like the trial happens.

Pros;

- No necessary for hiring any lawyer can have an appropriate person/team to hold this process

- Time can be saved as the handling of the dispute is done by side when the core business goes on.

- Cost-effective, as the team, is not an outsider and no extra pay should be provided.

- The judgment happens by evidence verification so chance of personal bias is less.

- It is a private trial and confidential

- Can appeal to the higher authority in arbitration if the first ground decision is not acceptable by any of the parties.

Cons;

- There is no legal bound and the decision has to well explain by the decision-maker, otherwise, the dispute may go as forest-fire.

- Personal influence over the authority

- Can only appeal to the available authority of the dispute team

- No detailed investigation happens, but trail happens with only discoveries

b) A contractual offer of arbitrating can be included in the employee handbook, but it is important that these should be clear and define. It should clearly have reference to the arbitration, limitation to the disclosure and it should be free from any terms that a layman cannot understand. It should include the followings;

-Rules governing, scheduling, and conducting the Arbitration

-Definition of Arbitration clause and claims

-Institution of Arbitration

-Impartial Arbitration authority selection and procedures

-Judicial jurisdiction terms

-Mutual promises by the parties in the ground of facts

-The limitation of disclaimers

It limits the party's choice of place and the language of the arbitration. And, there are many provisions which are bounded with the arbitration clause.

- Avoid words with any risk of ambiguity

-There should be a place of arbitration(shouldn't be virtual)

-The arbitral tribunal shall be governed by the Rules

-Proof of the authority of any party representatives should give given at the tie of the tribunal

- Emergency provisions are not applicable

The suggested language is as follows-

“All disputes arising out of or in connection with the present contract shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”