Elance - Dispute Resolution and Arbitration
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If the preceding options do not work, either party has the right to request binding arbitration to resolve the dispute. Unfortunately, Elance does not provide arbitration services; instead, it uses a third party arbitration company. The cost of the service is split equally among the two parties and Elance. Projects worth less than $1,000 are handled by a single arbitrator, with a cost of $99 to each of the client and contractor (plus $99 to Elance); larger projects are reviewed by an arbitration team, with each party having to pick up $199 of the expense. The arbitrator (or panel of arbitrators) reviews the facts of the case and rules in favor of one party or the other. Elance then follows the ruling, usually either releasing or refunding escrow as appropriate.
The arbitration process will only make use of evidence that is on file within the Elance system; any off-site communication will be ignored. This is pretty much necessary policy because of the ease with which emails and instant messages can be forged. It’s another reason why I recommend keeping all communication within the work room.
It doesn’t take a rocket scientist to figure out how unimpressive Elance’s arbitration system is. Like the dispute resolution steps before it, this arbitration policy puts most of the onus on the two parties to cover the cost of the arbitration. It also clearly sends the message that Elance itself really “doesn’t want to get involved”.
The cost of Elance’s arbitration service is very high as a percentage of overall project value for most Elance projects. A majority of fixed rate projects on Elance are under $500, and many are awarded in the $50 to $100 price range. For these, it would cost more for the arbitrator than the project is worth—and that’s before transaction fees. Even for larger projects, having to cough up $99 or $199 represents a big chunk of the project’s total value.
In addition to the actual monetary cost, the problem with Elance’s arbitration fees is that they present a tempting opportunity for abuse by unscrupulous clients or contractors. It’s bad enough to lose a bunch of money in arbitration where there’s an honest disagreement between the two parties; it’s much worse when someone takes advantage of the system to force the other party into concessions because the high cost makes arbitration impractical. I’ve read many accounts of contractors who have been arm-twisted into giving free services in order to get payment on small projects because arbitration would have cost too much. Similarly, many clients have been effectively forced to cough up extra payments to get projects completed because it didn’t make financial sense to go to arbitration to get their advance payments back.
By refusing to take sides in disputes, and not providing a cost-effective arbitration option for smaller projects, Elance too often leaves contractors high and dry. Given how much Elance charges in membership, connect, category and transaction fees, it should be able to do a better job than this in the cases where things go south. The company’s hands-off approach compares very unfavorably to the attitude taken by vWorker, for example, where the site itself provides—and pays for—arbitration.
At the very least, I think Elance should consider a change in policy so that the loser pays two-thirds of the arbitration cost and the winner pays nothing. This would remove much of the incentive for either side to game the system, and would likely reduce the overall number of arbitration cases as well.
This is one area where Elance really is an industry quality leader. Unlike some of its competitors, Elance does not try to stick its contractors with the bill in the event that a client files a chargeback with his or her credit card company after using a card to pay for contracted services. As long as you fulfill the requirements of either the Fixed Price Work Guarantee or Hourly Work Guarantee, Elance will try to go after a client who attempts a chargeback without taking the money from your account. That’s the way it should be done! Only vWorker matches this policy.
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