By Erika Winston
I recently found myself in a dispute with a large corporation, when I was not compensated for work I completed under a contract. Anticipating a legal battle, I went back and looked through our agreement to make sure that I was correct in my interpretation of the terms. I found that the contract contained an elusive arbitration clause, in the smallest font possible and hidden at the very end of the document. As I grabbed my glasses and read through the paragraphs, I felt my rights being taken away and I was increasingly angry at myself for signing a contract without thoroughly reviewing it.
If you have recently signed a service contract or business agreement, chances are high that you made my same mistake and agreed to an arbitration clause without thorough review. Even though most people sign without a second thought, many consumers have no clue what the terms arbitration and mediation mean. In most cases, it never applies, as long as both parties perform as agreed. When problems do arise though, these clauses can mean the difference between a large damage award and minimal compensation.
An arbitration clause requires parties to settle contract disagreements through a dispute resolution process, which aims to resolve conflict without going to court. A growing number of businesses are choosing arbitration to minimize legal costs and control more of the problem solving process. For example, through arbitration, the company generally chooses what third party will decide the issue. They can also control what evidence is allowable and schedule proceedings at their own convenience. However, as useful as arbitration clauses are to businesses, they can be equally as detrimental to consumers.
According to the American Bar Association, several consumer advocacy groups oppose the use of arbitration clauses, alleging that they are unfairly biased towards businesses. Contracts often require arbitration. By signing the contract, the consumer is left no other legal recourse for settling disputes with businesses. Additionally, the businesses may set procedural limitations that leave the customer with little control over the resolution process. For instance, the clause may require arbitration to take place in the state where the company is headquartered. This may create a hardship for the consumer, especially if he or she resides elsewhere in the country.
Arbitration agreements may also limit the type and amount of compensation allowed. Even if the consumer is successful, the remuneration amount may be far less than what a judge or jury would award. Several arbitration companies are currently facing lawsuits, with allegations that they are illegally working with businesses and siding in their favor, regardless of the facts.
Arbitration advocates argue that these negative allegations are unfounded and stand by the fairness and usability of arbitration for businesses, as well as consumers. They stress that attorneys are unnecessary, which makes the process more cost effective. Supporters of arbitration also claim that the process is shorter, with award amounts that are often higher than those given by the courts.
While big businesses are increasingly using arbitration clauses, small businesses are following the dispute resolution trend in a much less controversial manner, by using mediators to solve business disputes. Though conflict resolution is the main goal of both procedures, mediation generally differs from arbitration in a number of ways. Mediation tends to be less formal, with fewer procedural requirements, which makes it more accessible for small businesses, as well as customers. In addition, mediation is usually only binding on the parties if they mutually agree to the outcome. If no agreement is reached, the parties can still exercise their right to a trial. In arbitration, the third party makes a determination that is legally binding on everyone, whether the parties agree or not.
Let me demonstrate the difference with a hypothetical scenario. If I decide to arbitrate my contract dispute, I will sit down with a representative from the company and an arbitrator, who is usually an attorney or a judge. Once both sides are presented, which may involve several different meetings, the arbitrator makes a final determination that resolves the problem. Even if I am completely unhappy with the decision, I am bound to follow it because my signature is on the initial contract.
A mediation works a bit differently. In mediation, I would sit down with a representative from the company and a trained mediator, who would guide us in discussing our issues and developing a mutual solution. At the end of mediation, if I am amenable to the solution, I would sign off on it. By doing this, I agree to follow the mediated resolution. If I do not like the solution, I don’t have to sign it, and I can still exercise my right to file a lawsuit.
The Virginia court system offers mediation for various types of cases. Small claims matters are often referred to mediation, as are some divorce and custody cases. Disputes between landlords and tenants may also be referred to mediation.
Pamela Tynes-Morgan is a certified mediator with the Supreme Court of Virginia, primarily working in Richmond and Hampton Roads. She describes mediation as a process in which a trained neutral party facilitates communication between two or more opposing parties. “The process allows them to discuss the issues and concerns regarding the dispute. They can then gain a clearer understanding of each other’s underlying needs and overlapping interests to work along with the mediator and reach a mutually agreeable resolution.” She continued, “Mediation is an Alternative Dispute Resolution process which empowers parties to have a greater say in the outcome of their dispute. “
The process is completely voluntary and the parties can challenge the court’s referral. “The statement must indicate that the process of dispute resolution has been explained to the party and that he or she objects to the court’s Order of Referral,” explained Tynes-Morgan. If the parties are in agreement, a certified mediator is assigned to meet with the parties within 30 days. The case is also set for a return to Court, in case mediation is not successful. However, the Court must be informed in writing if the dispute is resolved prior to the return date or if a continuance is requested to allow additional time in the dispute resolution process.
While attorneys are not required during mediation, some parties choose to have attorneys present during the negotiations. Tynes-Morgan explains that the presence of lawyers can sometimes create a more adversarial environment, deterring the mediation process. “However, I encourage clients to have any proposed agreement reviewed by an attorney, because signing it is binding, enforceable in most Courts and can affect legal rights.”
Within Virginia’s court system, mediators must complete various levels of training for certification. Along with general instruction, trainees must also work with a certified mentor and undergo several mediation observations. In order to work with juveniles and domestic relations matters, the mediator is also required to complete a course related to domestic abuse.
Domestic relations courts encourage the use of mediation, especially for custody disputes. Tynes- Morgan explains that courts really do not have the time, or desire, to address the in depth emotions associated with family matters. “In some cases, when parties take the litigation approach, they abdicate their roles as decision makers and invite the Courts to do so for them. No one has a better understanding of their families than the people involved.”
For those considering the mediation process, Tynes-Morgan says that a willingness to participate is vital to a successful resolution. “I encourage participants to understand there is another’s perception of the situation. Sometimes we must dethrone our own personal perceptions to be open and receptive in exploring options for a resolution.” She continued, “Parties may enter a session angry, positioned and with much dislike for each other, but leave transformed into cooperative, collaborative, cordial and solution-focused partners. That’s where I find enjoyment.”