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12 Reasons Businesses Should Use Arbitration Agreements

Last year, the United States Supreme Court reaffirmed its view that arbitration agreements are valid contracts and must be “rigorously enforced.” This decision means businesses can better manage their legal risk by requiring their employees and customers to enter into arbitration agreements. In this article, I briefly outline the existing law on arbitration agreements, and then I identify and explain 12 reasons why businesses should use them. Download a FREE Guide That Reveals The 10 Things Every Business Needs To Know About Business Law The Law on Arbitration Agreements In April 2011, the United States Supreme Court upheld an arbitration agreement (that included a waiver of the right to pursue a class action) in AT&T’s consumer agreements. In a case called AT&T Mobility, LLC v. Concepcion, the plaintiff filed a class action against AT&T. The case made its way up to the Supreme Court. The Court concluded the plaintiff had to proceed to individual arbitration pursuant to the requirement and waiver in the arbitration agreement. The Court held that the Federal Arbitration Act (FAA) not only favors arbitration, but also disfavors class action proceedings. The Court relied on the FAA and stated that “requiring the availability of classwide arbitration interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Last year, in American Express Co. v. Italian Colors Restaurant, the Supreme Court confirmed what it stated in the Concepcion case. The Court made it clear that, because “arbitration is a matter of contract,” its terms must be “rigorously enforced by courts.” The plaintiffs in that case disputed a rate American Express charged merchants...