Occasionally, I get questions about arbitration. Should we have arbitration agreements? Why would we not? Isn’t it cheaper? Isn’t it quicker? Isn’t it secret? In theory, arbitration can be cheaper, quicker, and maybe even secret. That said, in real life, arbitration isn’t any of these things to the people that matter – the employer, the employee, and every other employee.
Arbitration is private court. Depending on the rules you select, you have between one and three judges. Attorneys represent both the employee and the employer. There is discovery where the parties exchange information and depose witnesses in front of court reporters. There are motions where attorneys for the parties argue (probably only in writing) over the rules of the hearing or whether the employee has a case at all. And, finally, there’s a hearing that looks remarkably like a trial but most likely in a hotel conference room rather than a courtroom. But, unlike court, once an arbitration is completed, there may be no right to appeal for both parties. Each could be stuck with the judgment.
The employee and the employer must agree to arbitration. Employees must sign arbitration agreements (most often at the start of employment) promising only to bring their case before an arbitration panel, not in court. In most cases, the arbitration agreement is presented at the start of employment and is a condition of employment. The arbitration agreement may include things like class action waivers (frowned upon by the NLRB, EEOC, and possibly the Supreme Court), confidentiality, and attorney’s fees provisions.
Arbitration is also controversial. Just this past month, arbitration has been criticized by former FOX News host and Roger Ailes sexual harassment target Gretchen Carlson, U.S. Senator Al Franken, The Atlantic, and Slate. Ms. Carlson has taken up the flag of eliminating arbitration as her cause, making her an odd partner with Minnesota’s super-blue Senator. Slate argued that the current sexual harassment nightmare is the result of stripping the right to a day in court away from sexual harassment victims. When arbitration class action waivers were argued before the Supreme Court just a few weeks ago, the Court appeared split. While the Court has also allowed (some would argue encouraged) arbitration, the pendulum appears to be swinging.
Employers spend a great deal of time and resources on preparing arbitration agreements and educating employees that they can only seek redress through arbitration due to a piece of paper they signed when they hoped this job would work out. No one starts a job thinking about how they’re going to sue them later. So should we be forcing them to make that decision when they are optimistic about their future with you? Would it be better to spend these resources on making employees feel valued, that they are contributing to the organization, and fixing issues as they crop up? I would argue it would be better.
Currently, over 250 women and men are in arbitration with Sterling Jewelers over sexual harassment claims throughout Kay and Jared jewelry stores all over the country. The case was originally filed in arbitration in 2009 – over eight years ago. When this many employees are involved (and many others are witnesses), the attorneys’ fees are this huge, and the time these cases have taken, the reasons for arbitration seem silly. It has not been quick, cheap, or secret.
Somewhere out there (and probably closer than we think) is a smart, capable plaintiff’s attorney who is gunning for arbitration agreements. With sexual harassment scandals coming from every direction adding to the calls to end these agreements, it might not be too hard to finally take them down.
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