HR to Include Pleasing Arbitration Provisions

By

Col (Retd) PK Chaturvedi, MS Consulting Mgmt, FICA, FIE, PGD CM

1
 Everyday, we talk about technology advancement and it shows new result very

frequently. We adopt new methods and still faces disputes. It has to be accepted that

disputes are un avoidable. Human resources are also facing disputes with employees

and trade unions. Besides Own Employees, HR also faces disputes with suppliers of

goods and services.

Employment is a contract, thus the fulfilment of a contract is an obligation for

both employer and employee to meet. Employees should be given adequate and

reasonable wages for their work, keeping in view the quality and quantity of work,

their needs and requirement, and the overall economic condition of the society.

Compensation must be determined in advance and wage has to be given immediately

once the work is completed. Compensation can either be monetary or non-monetary.

Wages and compensations are based on prior agreement and should be increased

according to circumstances. Appropriation of anything beyond the stipulated wages is

either an act of dishonesty or stealing both of which are expressly prohibited. In

addition, wages and compensation should be sufficient to provide a decent living. if

the wage is too low, the individual may not feel motivated to put in an adequate

amount of effort, on the other hand, stated that a worker is entitled to a fair and just

wage for his work.

We all agree that Arbitration, a form of Alternative Dispute Resolution

(ADR), is a legal technique for the resolution of dispute outside the court, where the

parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or

"arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a

settlement technique in which a third party reviews the case and imposes a decision

2
which is legally binding for both sides. Arbitration can be either voluntary or

mandatory. This is a commitment signed by both the parties before the arousal of any

dispute, hence signed as a mere formality. It is a proceeding in which a dispute is

resolved by an impartial adjudicator whose decision agreed by the disputing parties,

or decreed by the legislation, will be final and binding.

When someone takes a job, he agrees to employee handbooks and job

applications, many companies include a mandatory arbitration clause—meaning that

employee agrees to give up his/her right to take any dispute to court, even if the

employer has broken the law. Employers, particularly those in financial services,

health care and pharmaceuticals, often favor arbitration because it keeps costs down.

Analysis:- This provision, though looks to be highly simple and easy, but involves

many positive looks as well as negative looks.

A. The positive look is due to the following:-

Informal and cost effective process of resolution

Shortens delays and prompt resolution

Arbitrator selected with mutual consent establishes cooperation and

relationship.

B. The negative look is due to the following:-

Arbitration may be subject to pressures from powerful law firms

representing the stronger and wealthier party.

Arbitration agreements are sometimes contained in ancillary agreements or

in small print in other agreements. Consumers and employees often do not

3
know in advance that they have agreed to mandatory binding pre-dispute

arbitration by purchasing a product or taking a job.

If the arbitration is mandatory and binding, the parties waive their rights to

access the courts and to have a judge or jury decide the case.

In some arbitration agreements, the parties are required to pay for the

arbitrators, which add an additional layer of legal cost that can be

prohibited, especially in small consumer disputes.

In some arbitration agreements and systems, the recovery of attorneys' fee

is unavailable, making it difficult or impossible for consumers or

employees to get legal representation; however most arbitration codes and

agreements provide for the same relief that could be granted in court.

If the arbitrator or the arbitration forum depends on the corporation for

repeat business, there may be an inherent incentive to rule against the

consumer or employee.

There are very limited avenues for appeal, which means that an erroneous

decision cannot be easily overturned.

Although usually thought to be speedier, when there are multiple

arbitrators on the panel, juggling their schedules for hearing dates in long

cases can lead to delays.

Arbitrators are generally unable to enforce interlocutory measures against

a party, making it easier for a party to take steps to avoid enforcement of

member or a small group of members in arbitration due to increasing legal

fee, without explaining to the members the adverse consequences of an

unfavorable ruling.

4
 Applicable law is not necessarily binding on the arbitrators, although they

cannot disregard the law.

Discovery may be more limited in arbitration or entirely nonexistent.

Unlike court judgments, arbitration awards themselves are not directly

enforceable. A party seeking to enforce an arbitration award must resort to

judicial remedies, called an action to "confirm" an award.

Although grounds for attacking an arbitration award in court are limited,

efforts to confirm the award can be fiercely fought. This requires huge

legal expenses that negate the perceived economic incentive to arbitrate

the dispute in the first place.

Arbitration, along with conciliation and mediation, is an out-of-court

method of resolving problems between persons or companies, who have

previously agreed to allow a third party (arbitrator or a panel of arbitrators)

to decide the case, pass an award and enforce the same.

With the growing faith in arbitration, a parallel skepticism has also crept in

over the dilution of the law, ironically, by courts themselves. At the heart

of the malaise afflicting arbitration is the tendency of courts to supervise

the process, thereby going against the spirit of the law—which was to

provide an alternative route to the court process.

Detailed arbitration clauses are now integral parts of high-stake contracts. Law

firms have separate practice areas for arbitration and a growing number of foreign

lawyers, retired judges and domain experts are being engaged to decide disputes.

Also emerging are arbitration centers or institutions that provide basic rules and a

readily available panel of arbitrators with a prescribed fee structure. Both side

accept discomfort rather than for arbitration. We need to address each cause listed

5
under serial one to fifteen above. We may re-write story of Monkey and Two Cats

to Guru and Two Disciples, where guru asks the disciples to eat the cake between

them in order to see a smile on their faces. That is the food of an impartial

adjudicator. The crucial role one can play by converting Dispute to differences to

be settled by mutual agreement and having smile on both parties’ faces. There is a

considerable scope to have ‘fire-preventive policies’ by HRM rather than

continuing to the pre occupied ‘fire fighting dispute settlement practices’.