Employment arbitration has often been the preferred method of dispute resolution in most commercial contracts in India, including employment contracts. Factors including privacy, flexibility, cost, and time effectiveness of arbitration have been some of the key driving contributors to such a growing preference for arbitration over traditional court-driven and other dispute resolution methods. That said, however, Indian law does place a restriction on arbitrating ‘certain disputes’ on account of public policy considerations.
Through this article, we evaluate and explore the complexities surrounding the arbitrability of disputes arising out of employment contracts in India through various judicial precedents, with the aim of decoding the scope of employment disputes that can be adjudicated through arbitration.
Employment Arbitration is a method of amicably settling workplace disputes in an efficient way. It pertains to disputes between employees and employers through a confidential and private process. The agreement governing such Employment Arbitration must necessarily contain the place/ venue of Arbitration, applicable rules, the rule for the enforcement of an award, the appointment of an arbitrator, and the method for evidence.
Employment Arbitration has gained significant momentum in recent years owing to its cost-effectiveness and efficiency. It provides for a flexible procedure in a short span of time.
Legal Framework Governing Employment Arbitration in India
Employment Arbitration in India has often been the preferred method of dispute resolution owing to its confidentiality, flexibility, effective cost time consumption etc. The Indian Arbitration and Conciliation Act, 1996 defined the law on domestic arbitration, International Commercial arbitration and conciliation.
However, the law fairly excludes certain disputes from being arbitrable in nature. As such ‘arbitrability’ refers to the question of whether a particular dispute can understand arbitration for resolution. In the case of Vidya Drolia & Ors. v. Durga Reading Corporation, the Supreme Court laid down a fourfold test for determining ‘arbitrability’. The dispute shall be non-arbitrable when:
- Involves actions in rem and not rights in personal
- Non-arbitrable under mandatory statute.
- Affecting third parties
- Inalienable sovereign and public interest.
The aforementioned judicial test of arbitrability is often employed in the context of Employment Arbitration.
Key Considerations in Employment Arbitration Clauses
An Employment Arbitration clause needs to be drafted with certain mandatory considerations to ensure an effective outcome.
- Narrow and precise: the clauses stating Arbitration is the method of dispute resolution should be clear and specific. It should explicitly mention the rules governing the arbitration.
- Law and rules: It must specifically determine the law applicable to the arbitration agreement, and rules to be applied during the proceedings. Parties may also choose the way in which arbitration will be conducted i.e. under institutional rules.
- Appointment of arbitrators: parties should mutually appoint a neutral and impartial arbitrator to ensure that the procedure remains transparent and is conducted fairly.
- Enforcement of an Arbitral Award: The parties must comply with all the legal standards required for an award to be enforceable in India. It would require compliance with the Arbitration and Conciliation Act, 1996.
Best Practices for Employers: Implementing Employment Arbitration
Employment Arbitration being a process requires certain best practices in order to provide an efficient outcome to the parties. Drafting the agreement in a clear and vivid manner can assist the court in Enforcing the same. It can ensure that the agreement stands up to legal scrutiny when questioned by either party.
Providing narrow and precise clauses in the agreement in compliance with the legal standards can assist the parties in overcoming any enforcement challenge.
In cases of one of the parties being a multinational employer, an international arbitration agreement shall be formulated. Adopting this practice will prevent any dispute regarding the venue or seat of arbitration, choice of law, and the procedure of enforcement of an arbitral award.
Challenges in Employment Arbitration and How to Overcome Them
Employment Arbitration despite offering an effective alternative to dispute resolution undergoes numerous lacunas including lack of awareness, cost, prolonged arbitration, enforcement issued etc.
Parties in India are yet new to the concept of arbitration; hence they are not equipped with the technical know-how of the same. The challenge of lack of awareness can be overcome by engaging an Employment dispute lawyer in India who will assist in providing training and resources to enlighten the parties regarding the arbitration procedure.
During the process of selecting an arbitrator, concerns about personal bias or partiality may hamper the outcome of such proceedings. Hence, the appointment of a neutral and experienced arbitrator will uphold the sanctity of arbitral proceedings thereby maintaining transparency.
Enforcement of an arbitral award is one of the problematic areas in arbitration. Such enforcement though covered under the Arbitration and Conciliation Act, 1996 faces challenges in practice. Parties in such cases are advised to coherently draft the clauses in their agreement and seek Employment arbitration legal services to address these concerns.
Lastly, though the process provides quick dispute resolution, it can still be expensive and time-consuming. Drafting the arbitration clauses and the prayer sought precisely can assist the parties in amicably settling the dispute efficiently.
Role of Arbitration Law Firms in Employment Dispute Resolution
Arbitration law firms in India provide a confidential and private method of dispute resolution. The pursued expertise herein can assist to parties in the effective conduction of the arbitration. Arbitration law firms in India provide essential legal guidance in terms of arbitration clauses. The work may include drafting clauses, determining arbitrators and the seat.
These firms often represent the parties in arbitral proceedings, presenting the claims of the respective parties. Effective representation can uphold the principle of natural justice. In cases of enforcement of arbitral awards, these firms provide legal assistance in effective Compliance and the enforcement thereof. Arbitration law firms in India can often be utilized in acquiring legal advice pertaining to Employment Arbitration.
Conclusion
Employment Arbitration offers an efficient substitute for traditional litigation. It absolves the party’s liability of going through endless paperwork and documentation processes. By engaging an employment dispute lawyer in India and arbitration law firms in India, the parties can draft effective arbitration clauses and understand the legal framework.
In view of the recent judgment in N.N. Global Merchantile Pvt. Ltd. V. M/s. Indi Unique Flame Limited and Ors., the parties can even enforce the unstamped contracts containing arbitration clauses including an unstamped arbitration agreement. Such precedents provide a hassle-free approach to dispute resolution.
Expert Employment Arbitration Services by ACM Legal
If you are seeking expert guidance in navigating employment arbitration, ACM Legal is here to provide top-tier legal services. Our team of experienced employment dispute lawyers and arbitration specialists ensures that your dispute resolution process is efficient, confidential and compliant with Indian legal standards. From drafting precise arbitration clauses to representing you in arbitral proceedings, ACM Legal is dedicated to delivering successful outcomes.
FAQs on Employment Arbitration
1. What is employment arbitration, and how does it differ from traditional litigation in India?
Employment Arbitration is a method of dispute resolution taking place between an employer and an employee. Owing to its efficient nature, parties prefer arbitration over traditional litigation. Arbitration involves a neutral third party who adjudicates the disputes.
2. Are all types of employment disputes in India arbitrable under the current legal framework?
Not all Employment disputes can be referred to arbitration. Certain matters pertaining to public policy and fundamental rights are not arbitrable in nature. The current legal framework surrounding the arbitrability of a dispute is The Arbitration and Conciliation Act, 1996 and Industrial Disputes Act.
3. How can employers ensure that arbitration clauses in employment contracts are legally enforceable in India?
Hiring an engagement dispute lawyer in India to scrutinize employment contracts can ease the work of employers. Certain essentials include clear and specific liabilities, and compliance with legal standards.
4. What are the key benefits of choosing arbitration over litigation for resolving employment disputes in India?
Preferring Arbitration over traditional litigation provides an efficient and quicker resolution of disputes. Providing an upper hand to party autonomy will not jeopardize the rights of the parties.
5. What role do arbitration law firms play in navigating employment disputes in India?
Arbitration law firms in India assist employers with drafting the dispute resolution clause, defending the parties, advising on legal compliances and managing of enforcement of arbitral awards.
Author: Anjali Singhvi, Associate
Co-Author: Eylah Singh, Intern
