Tag: mandatory arbitration agreements

Business legal services in Silicon Valley

Ways to Resolve Disputes Between Businesses

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When you are facing a business dispute, it is important to consider your options for a cost-effective and timely resolution. When businesses are engaged in disputes with one another—particularly when those businesses are located in different areas of the country—forms of alternative dispute resolution (ADR) can be particularly useful. By using ADR, you can avoid costly litigation, and you may be able to avoid multiple trips to another region of the country for court hearings. To be sure, you do not want to spend money on multiple trips for court hearings when you could resolve your business dispute quickly and efficiently. At the same time, employing methods of alternative dispute resolution can allow businesses to avoid complications concerning jurisdiction and choice of law matters.

Mediation and arbitration are two commonly used forms of alternative dispute resolution under California law. Our experienced business attorney can help you understand the benefits and limitations of each type of ADR.

Mediation to Resolve a Business Dispute

Mediation is a form of ADR that requires the disputing parties to engage in communication with one another, with the aim of reaching a resolution to their dispute. In mediation, you meet with the other party and a neutral third party (the mediator). Your attorney, as well as the other party’s attorney, can also be present.

Mediation cannot be compelled, both sides must consent to mediation.  Mediation is much different from a court hearing in which a judge hears both sides of a dispute and makes a ruling or decision. In mediation, the mediator’s job is to facilitate communication between the parties. The mediator does not issue a decision about the dispute. If you cannot reach an agreement with the other party, then your case can move onto arbitration or litigation. If you can reach a decision, then you can enter into a formal agreement with the other party to officially resolve the dispute.

There are both benefits and limitations to mediation. An obvious benefit is that the process is much faster and less expensive than litigation. You may need to attend mediation only once before reaching an agreement. Another benefit is that the discussions during mediation are confidential. As such, any confidential matters pertaining to your business will not become public record. Nor can the statements made and documents presented through mediation be used in a subsequent arbitration or litigation. Finally, mediation can allow you to play a key role in resolving your own dispute, and it may improve communication between you and the business with which you had a dispute. The major limitation of mediation is that you cannot compel the other side to produce evidence you may need to prove your claim.  Also, if you cannot reach an agreement, the mediation may not be a good use of your time or money.

Using Arbitration for Disputes Between Businesses

Many businesses rely on arbitration to resolve disputes with customers, employees, and vendors, but arbitration can also allow you to resolve a dispute with another business.

Like mediation, the key benefits of arbitration are that it is quicker than litigation and more cost-effective. Unlike mediation, an arbitrator—a neutral third party (arbitrator(s))—hears the dispute and can issue a binding decision. Unlike mediation, arbitration can be compelled if there is a signed written agreement between the parties to arbitration.  One of the key limitations of arbitration. If you don’t like the outcome, your options for appeal are much more limited than they might be if you had chosen litigation.

Seek Advice from our Fremont Business Lawyer

If you need assistance resolving a business dispute, our Fremont business law attorney can help. We serve businesses in Fremont, Hayward, Union City, Milpitas, and Newark, CA. Contact the Law Firm of Lynnette Ariathurai online today or call us at 510-794-9290 for more information.

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Business legal services in Silicon Valley

Can California Employers Still Have Mandatory Arbitration Agreements with Employees?

Business lawyer

Business owners and employers in Fremont and throughout Northern California should know that they may not be permitted to require employees to agree to arbitration clauses or agreement under particular circumstances, according to a new law in the state. The new law, Assembly Bill 51, limits the ways an employer can use an arbitration clause. In brief, you may not be able to require new employees to sign employment contracts that contain arbitration clauses. We want to provide you with more information about the new law, which was supposed to take effect in early 2020, and to explain what its implications might be for California businesses.

Understanding California Assembly Bill 51

California Governor Newsom signed Assembly Bill 51 into law in October 2019, to commence in January 2020. The law is designed to prohibit employment discrimination, and one aspect of the bill is that it prohibits employers from requiring job applicants or current employees, as a condition of their employment, to enter into arbitration agreements. The legislative reasoning behind this part of the bill was that arbitration agreements can unnecessarily silence employees and can prevent them from making concerns about sexual harassment at work, public.

Under the new law, it is unlawful (and actually criminal) for an employer to require a job applicant or an employee to agree to an arbitration under the California Fair Employment and Housing Act (FEHA) or the California Labor Code, as a condition of that person’s employment. The law does not invalidate currently existing arbitration agreements. Yet business advocates have filed a lawsuit to prevent the new law from taking effect, arguing that the Federal Arbitration Act (FAA) preempts AB 51. The U.S. District Court for the Eastern District of California recently issued a preliminary injunction that prevents California from enforcing the terms of AB 51. Until the case is ultimately decided, what should your business do?

Impact of AB 51 on Businesses in California

For many businesses in California, arbitration—including mandatory arbitration—can help to keep business costs down and can prevent costly business litigation in the event of an employment or other contract dispute. As such, it is in the interest of many small businesses in Northern California that the law be preempted by the FAA.

In the meantime, what should you, as a business owner in the Fremont area, do to ensure that you are in compliance with existing law? Most importantly, you should know that any arbitration agreement that existed prior to January 1, 2020—when AB 51 was supposed to take effect—does not fall under the new law at all. Even if it were to take effect, arbitration agreements in force prior to this date will remain lawful. Next, you should keep in mind that AB 51 only applies to claims under the FEHA or the California Labor Code. Accordingly, it is certainly lawful to require employees to agree to arbitration for disputes that would not arise under either of these laws.

If you want to require an employee or prospective employee to agree to arbitration for claims that could potentially be covered by AB 51, it is important to recognize that you are taking a risk as a business. If AB 51 is ultimately determined to be lawful and not preempted by the FAA, then any arbitration agreements you make after January 1, 2020 could result in both civil and criminal penalties. However, if AB 51 ultimately cannot take effect, an arbitration agreement that would otherwise be prohibited by AB 51 could be enforceable in California. If you have questions about your business’ situation, you should speak with a business lawyer as soon as possible. 

Contact a Fremont, CA Business Law Attorney

If you have questions or concerns about how the new limits on arbitration could impact your business, it is important to speak with an experienced Fremont business law attorney as soon as possible. The law will have significant practical considerations for many small business owners, tech companies, and other businesses in the region.

 Contact the Law Office of Lynnette Ariathurai online today or call us at 510-794-9290 to learn more about whether California employers can still have mandatory arbitration agreements with employees. We represent business owners across Northern California in Fremont, Hayward, Union City, Milpitas, and Newark.

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