Arbitration vs Courts: Understanding the Key Differences

When a legal dispute arises, many people assume the only path to a resolution is going to court. However, a common alternative, often hidden within the fine print of contracts, is arbitration. Understanding the fundamental differences between arbitration vs courts is crucial for anyone entering a legal agreement, especially in California.

What is Arbitration?

Arbitration is a private, out-of-court process where parties in a dispute agree to have their case decided by a neutral third party, known as an arbitrator. The Federal Arbitration Act (FAA) of 1925 supports this method as a valid alternative to traditional litigation. While arbitration is legally binding and final, it differs from a court trial in several significant ways:

• Privacy: Unlike a public court trial, arbitration proceedings are confidential. This means the evidence presented and the final decision are not part of the public record.
• Finality: The decision made by an arbitrator is almost always final. Unlike a court verdict, which can often be appealed, an arbitration decision can only be challenged under very limited circumstances.
• Waiver of Rights: By agreeing to an arbitration clause in a contract, you are typically waiving your constitutional right to a trial by a jury.

Arbitration vs Courts: The Impact on Employees

The debate over arbitration vs courts is particularly relevant in employment law. Many employers include mandatory arbitration clauses in employment contracts. This means an employee waives their right to sue the company in court and must instead resolve any disputes through a private arbitration process.

California’s AB 51, a law enacted in 2019, sought to make it unlawful for employers to force employees to sign these mandatory arbitration clauses. This legislation was a significant step toward ensuring employees and the working class were not forced to waive their fundamental rights to a trial. AB 51 allows employees the choice to address legal issues in court, which is especially important for sensitive cases involving hostile work environments or harassment.

The legal battle over AB 51, while ongoing, highlights the core differences between the two systems. The confidentiality of arbitration can make it easier to conceal past allegations, which can prevent them from coming to light. A public court trial, on the other hand, creates a public record, holding parties accountable and potentially preventing future harm.

Your Choice in Legal Matters

While arbitration offers a private and often faster resolution, it comes with a trade-off. It is essential to understand the terms of any contract you sign and the implications of an arbitration clause. The legal protections offered by a public court trial, including the right to a jury, are a fundamental part of the justice system. For many, having the option to choose between arbitration vs courts is a critical step in protecting their rights.