It’s not uncommon for many Oregon businesses to require both their employees and clients to sign a contract that includes an arbitration or mediation clause. This type of clause helps the business avoid litigation, meaning going to court under a lawsuit. It’s important to understand what arbitration and mediation are so that you understand what you’re agreeing to in a contract.

What is mediation?

Mediation is a form of alternative dispute resolution that involves getting both parties of the contract together with a mediator. This is a fairly informal process where both parties discuss the problem and work to come up with a solution alongside the mediator. The mediator does not have any sort of binding power to make a decision about the settlement between the two parties. Rather, mediation is simply meant to be a negotiation process with a neutral third party who can help to come up with an agreement that works for both parties.

What is arbitration?

Arbitration is a more formal process that involves a professional arbitrator. The arbitrator will sit down and listen to both sides of the argument and then make a decision. In arbitration, both parties are typically bound to the decision that the arbitrator makes. This means that even if they don’t like the outcome of the arbitrator’s decision, they still must abide by it under the law. This type of formal process is more like a trial where both parties are bringing their disputes to a trained professional to get a ruling.

Given the high cost of litigation, many businesses require that their clients sign agreements with an arbitration or mediation clause. This helps contracts outline in which way a dispute between the two parties can be handled. While you might not be going to court, you may want to consider hiring an attorney to help with the mediation or arbitration process.