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Is mandatory arbitration appropriate for your business?

Arbitration can be a powerful tool for Georgia businesses. Rather than head to court where legal matters are often dragged out and costly, arbitration offers a solution that is generally both cost and time effective. However, there has been pushback against mandatory arbitration in recent years, which may leave some business owners wondering whether the practice is right for them.

Arbitration appears to be on the rise

Data shows that employment disputes resolved via arbitration rose approximately 66% over the course of three years. There were only around 3,000 workplace arbitration cases closed out in 2018 compared with 5,000 in 2020. This is despite many companies — including Google, Microsoft and Facebook — committing to drop mandatory arbitration for cases involving sexual harassment and assault. Instead, these arbitration cases seem to be focused on:

  • Wage and hour violations
  • Discrimination
  • Severance agreement

Another benefit of arbitration is that it offers privacy to both companies as well as employees. Information collected in a 2018 study from the Economic Policy Institute found that more than half of all nonunion private sector employers use mandatory arbitration. That percentage jumps to 65% when looking at companies with more than 1,000 employees.

Despite offering a cost effective, timely and private alternative to court, arbitration is often painted in a poor light. Business owners may even be hesitant to enact mandatory arbitration clauses due to fear of backlash. Those who are eager to learn more about how arbitration can help their businesses or how to go about implementing it would be well advised to speak with an attorney who is experienced in Georgia business law.