Mandatory Arbitration Policies: Are They Right for Your Organization?

Since the U.S. Supreme Court’s May 21, 2018, decision in Epic Systems Corp. v. Lewis (2018) holding that class action waivers in arbitration agreements are lawful, many members have inquired whether it is appropriate or advisable to implement a mandatory arbitration policy for their non-union employees. Determining whether mandatory arbitration is appropriate for any workplace involves numerous considerations. Employers may find the following useful in determining whether mandatory arbitration is the way to go.

The Advantages Of Mandatory Arbitration

Arbitration typically is characterized as a way to resolve disputes efficiently and economically. Arbitration is usually cheaper than litigation because discovery and motions practice is almost always streamlined, thereby saving time and expense. In addition, arbitrators generally are much more willing to accommodate scheduling needs of the parties, whereas courts are bound by busy trial calendars and the court’s rules of procedure.

When the arbitration hearing begins, the formal rules of civil procedure and evidence used by courts generally do not apply. Rather, the rules are simplified and, as a practical matter, an arbitrator’s ruling cannot be disturbed in most cases because of a perceived error in admitting or denying the entry of evidence. Notably, arbitration almost always eliminates or generally reduces the need or opportunity to engage in discovery, which often serves to delay a court case and run up a party’s legal fees. Thus, from a purely economic perspective, arbitration almost always is much cheaper and faster than court litigation.

The Disadvantages of Mandatory Arbitration

The advantages of arbitration must be weighed against its disadvantages. The primary disadvantage is that an arbitrator’s decision and award is nearly impossible to overturn. Even if the arbitrator misunderstands the facts or renders what one of the parties believes is an illogical decision, the courts almost always uphold an arbitrator’s decision.

Also, many employees may resist mandatory arbitration for the very reason that an employer wants it; i.e, to preserve the right to a jury trial. Juries are notoriously unpredictable.

Finally, while mandatory arbitration has been touted as much less costly than court litigation, the cost of arbitration also is rising. Many arbitrators charge up to $3,000 to $4,000 for each day of a hearing. In addition, many arbitrators are not local, which means that the parties must pay for the arbitrator’s travel and lodging expenses. And, in this regard, because an arbitrator’s costs can be much higher than the cost of filing a lawsuit, many state laws or court decisions require the employer to pay the arbitrator’s fees and expenses, because failure to do so would place an undue financial burden on employees who are attempting to vindicate a statutory right.

The bottom line is that whether mandatory arbitration is an appropriate policy for your workplace depends on a host of factors. If you require more information or would like to discuss arbitration for your workplace, please contact Employers Council.