A contractual arrangement mandating the resolution of workplace disputes through a private, often less formal, process instead of court litigation. Under its terms, an employee consents to forgo their right to sue their employer in a civil court, agreeing instead to submit any grievances, such as wrongful termination or discrimination claims, to a neutral third-party arbitrator for a binding decision. For instance, a clause within an employment contract may stipulate that all disputes arising from the employment relationship will be settled via this mechanism.
Such agreements offer several advantages, including potential cost savings and expedited resolution compared to traditional lawsuits. Historically, they have been utilized to manage legal risks and streamline dispute resolution procedures within organizations. They provide a confidential alternative to public court proceedings, which can be beneficial for both the employee and the employer. Their enforceability has been the subject of legal scrutiny, with courts balancing the promotion of alternative dispute resolution against concerns about fairness and employee rights.
