What Is Arbitration, and How Does It Affect Your Legal Rights?
When you’re involved in a legal dispute, the path to resolution isn’t always through a courtroom. One alternative to trial that often comes up—sometimes unexpectedly—is arbitration. At Zimmaro Law, we want our clients to understand what arbitration is, how it works, and how it might impact your case.
What Is Arbitration?
Arbitration is a method of resolving disputes outside of court. Unlike mediation, which is non-binding and focused on negotiation, arbitration involves a neutral third party—or a panel—who hears both sides and makes a binding decision. There are a few different types of arbitration, and each has its own rules and implications.
1. Contractual Arbitration
Contractual arbitration is the most common and often the most surprising for clients. Many businesses include arbitration clauses in their contracts—sometimes buried in the fine print. You might unknowingly agree to arbitration when signing a car rental agreement, service contract, or even waivers at recreational facilities like trampoline parks.
These clauses are designed to keep disputes out of court and away from juries. But the enforceability of such agreements can vary. For example, in Pennsylvania, a parent cannot waive a minor child’s right to a jury trial in a personal injury case—even if they signed an agreement with an arbitration clause. In a recent case at Zimmaro Law, this allowed us to move forward with a jury trial despite the arbitration language.
2. Court-Mandated Arbitration Based on Case Value
In some counties, smaller-value cases (typically under $50,000, depending on the jurisdiction) are automatically directed to arbitration when filed. In these situations, a panel of three local attorneys—who volunteer for this role—acts as the arbitrators. They hear the case and issue a decision, which can be appealed if either side disagrees.
3. Voluntary Binding Arbitration
This form of arbitration closely resembles mediation but with one major difference: the decision is final and binding. Instead of preparing for a full jury trial, both parties agree to let an experienced attorney or retired judge act as the arbitrator. They hear the case, review evidence, and deliver a binding resolution. This process is quicker and often more cost-effective than going to court but is less commonly used.
When Does Arbitration Come Into Play?
In practice, mediation is more commonly used in civil cases than arbitration. Arbitration generally becomes relevant in three scenarios:
- You’re bound by a contract: Common in nursing home cases, product purchases, and service agreements.
- You’re dealing with a lower-value case: Automatically routed into arbitration by the court.
- You voluntarily choose arbitration: As an alternative to trial, with both sides agreeing in advance.
While mediation and arbitration can both occur in the course of a case, one does not necessarily precede the other. In some situations, you may be required to arbitrate from the start, bypassing mediation altogether.
Know What You’re Signing
Arbitration clauses can significantly limit your legal options. Always read the fine print in contracts and understand what rights you may be giving up. At Zimmaro Law, we can help evaluate these agreements and determine the best course of action, whether that means fighting to invalidate an arbitration clause or navigating the arbitration process strategically.