Being in business means dealing with customers, vendors, employees and lots of other people. Unfortunately, dealing with people can create conflict. Conflicts or disputes can start with a small difference of opinion and quickly escalate. Disputes arise around bill collections, employee performance problems, partnership disagreements and broken contracts. Leaving a conflict unresolved or handling it badly can affect more than just the people involved. It can affect the success and stability of a business for years.
WHY NOT TAKE IT TO COURT?
The legal system may be the first option for dispute resolution that comes to mind. Going to court, however, can escalate a dispute and in the end, the only ones who win are the lawyers. Real lawsuits don’t get neatly tied up in less than 60 minutes like court cases on TV. Going to court almost always means burned bridges and hard feelings. It can pit co-workers and community members against each other, and often ends relationships permanently. Going to court costs a lot of money and wastes a lot of time. Other methods of dispute resolution, on the other hand, can save time, money and relationships. Think of a lawsuit as a last resort if an agreement can’t be reached any other way.
MEDIATION
One alternative method that provides cheaper, faster dispute resolution is mediation. In mediation, a neutral third party works with both sides in a dispute trying to facilitate a settlement that’s agreeable to all. This neutral person is chosen by the parties, and is usually experienced in mediation. A good mediator will calm emotions while determining the interests of both parties. The mediator will attempt to satisfy both sides with possible solutions, hopefully resolving all issues without a lawsuit. Mediation sometimes takes place after a lawsuit has been filed and, if successful, cuts the proceedings short, saving time and money. While mediation can be helpful, it has its limits because a mediator does not have the authority to make a binding decision.
The benefits of mediation are:
• It is private and confidential.
• Parties are directly involved and work together in negotiating the settlement.
• The mediator objectively helps the parties in exploring possible solutions.
• Because mediation can be scheduled early in the dispute, a settlement can be reached much more quickly than through litigation.
• Both parties save money through reduced legal costs and staff time.
• The chances of continuing a business relationship after resolving the dispute are increased.
• Creative solutions can become part of the settlement.
ARBITRATION
Arbitration is another form of dispute resolution. Unlike mediation, where a third party makes suggestions for settlement, an arbitrator hears both sides of the dispute and makes a decision on the issues. The decision is binding and cannot be appealed.
While there’s no guarantee you’ll be happy with the outcome, arbitration is usually less adversarial, less formal and generally takes less time than a legal trial. It is also generally cheaper than going to court.
Other benefits of arbitration include:
• Unlike a trial, which is open to the public, arbitration is private. There is no public record of the proceedings.
• The extensive “discovery” or relevant documents required in a court case can be avoided. There is only a limited exchange of documents that relate specifically to the dispute.
• Unlike the courts, arbitrators don’t usually have much of a backlog so hearings are scheduled as soon as both parties and the arbitrator are available.
• You can choose an arbitrator with expertise and training that relates to the subject of the dispute. If the dispute is with an employee over job performance, for example, you would most likely choose an arbitrator with employment law experience.
• Because of limited discovery, informal hearing procedures, and the expedited nature of the process, parties save on legal fees.
• Arbitration is less adversarial and more informal than litigation, so chances are better that you can continue to have a relationship with the other people involved in the dispute after a decision is made.
When drawing up business contracts, you can include what is called an arbitration provision. If you include this clause requiring arbitration, then any disputes “arising under or relating to” the agreement must be arbitrated. This allows you to avoid a lawsuit and instead hire an arbitrator to rule on future disagreements over the contract.
WHERE TO FIND ALTERNATIVE SOLUTIONS
Professional arbitrators and mediators list their services in phone book advertising and on the Internet, but you may want to get a referral from a trusted business peer in your community. Local chapters of the Better Business Bureau or American Bar Association may offer arbitration services or be able to recommend someone. Arbitration can be arranged privately or through a recognized service, such as the American Arbitration Association.
Many arbitrators are lawyers, former judges and business leaders. An effective arbitrator will have experience and knowledge of multiple industries.
Because alternative methods of dispute resolution only take a few days, the total cost to the parties involved is likely to be less than with a lawsuit, especially since research and discovery costs, court fees and expert witness expenses are eliminated.
Mediation and arbitration services are not free, however. Fees can exceed $200 per hour. There is also a filing fee for commercial arbitration that can range from several hundred to several thousand dollars depending on the complexity of the dispute. Generally, the parties will split the fees. How they will be split should be agreed upon prior to the start of mediation or arbitration.
