Is arbitration better for plaintiff employees or defendant managements?

In many respects, the use of arbitration to settle an employment discrimination dispute is better for the defendant employers than for the plaintiff employees. If you are a plaintiff employee contemplating arbitration as a means of solving your dispute, take a moment to consider the following:

Why arbitration is probably not a good idea for plaintiff-employees:

Almost all experienced attorneys for plaintiff employees believe that arbitration is not a very good idea for the plaintiff in employment discrimination cases (or any other case where the other side has all the bargaining power, for that matter). This is because the process of arbitration, by its very nature, is not completely neutral or unbiased; it usually favors the defendant employer from start to finish. Thus, if you are a plaintiff in an employment discrimination case, you should try to avoid arbitration if possible.

1. Arbitrators usually favor the defendant.It is virtually impossible to get a truly impartial and unbiased arbitrator, for two reasons:

  • First, there is a “repeat-player” bias: defendant employers often hire the same arbitration company, and even use the same arbitrator, over and over again. In a way, then, many arbitrators are beholden to and therefore biased in favor of the defendants, since the defendant employers are a regular source of income for these arbitrators.
  • Second, the arbitrators are not completely neutral because they know that if they issue a large award to the plaintiff, their career will be finished—no defendant employer would want to hire them in the future.

Moreover, unlike many state and federal judges who issue public opinions regarding the cases they preside over, arbitrators and their arbitration associations treat the arbitral decisions as “top secret information.”

2. The plaintiff is not entitled to the advantages of a jury trial. Once in arbitration, the plaintiff’s discovery rights are severely restricted, so you are extremely limited in the kinds of documents or information you can procure from the other side. In addition, arbitrators tend to look at discrimination cases from a point of view that is completely different (and less sympathetic to the plaintiff) than what a normal person sitting in a jury would think. Thus, even if the arbitrator finds in favor of the plaintiff, he will almost certainly issue an award that is significantly lower than what a jury would have determined.

3. There are limited rights to appeal. After an arbitral award has been issued, the plaintiff is extremely limited in his right to appeal, even if the arbitrator made a huge error of fact and law.

Why arbitration is good for the defendant-employers:

In many respects, arbitration is a very attractive option for defendant employers:

1. Arbitrators are less sympathetic to the plaintiff than the jury is. It is widely believed that an arbitrator is different from a jury of the plaintiff’s peers in that the arbitrator is much less likely to be influenced by or sympathetic to the plaintiff employee’s plight. The arbitrator is also less likely to harbor resentment towards or prejudice against large corporate employers who are the defendants. Most attorneys also believe that arbitrators tend to award the plaintiff lower amounts of money for emotional distress and punitive damages claims than what a jury would typically award.

2. Mandatory arbitration often discourages plaintiff-employees from pursuing a claim. Because arbitration awards are believed to be smaller than jury verdicts, it is also thought that mandatory arbitration may discourage employees from pursuing their claims in the first place. Plaintiffs will have a harder time finding an attorney who is willing to work on a contingency fee basis in such cases.

3. Arbitration is cheaper than litigation. Many defendant employers prefer arbitration because it is generally considered to be cheaper than litigation. This is mainly because arbitration proceedings often limit discovery, which is a pre-trial process by which each party obtains evidence from the opposing side.

4. Arbitration is more private and confidential than court proceedings. Arbitration is preferable for defendant employers who want to avoid bad publicity because there is a heightened degree of privacy and confidentiality.

Why defendant-employers might want to think twice before going to arbitration:

At first, it may seem that defendant employers are better off in arbitration rather than in court. However, recent developments in arbitration law and practice have made employers think twice before going to arbitration. Arbitration is increasingly becoming more and more like litigation, so it might not be worth it for the defendant-employer to pursue arbitration. Potential drawbacks for the defendant include the following:

1. The courts have recently increased the plaintiff-employee’s right of discovery. Recent judicial decisions have somewhat broadened a plaintiff’s discovery rights when it comes to statutory claims of discrimination. As a result, many defendant employers are finding that arbitration is not as much of a simple, informal, or quick process as it once was.

2. The defendant-employer might not have a cost advantage with arbitration, after all. Even the cost advantages to arbitration are less clear, since in most cases, the defendant-employer will be required to pay the entire cost of the arbitration. Arbitrator fees can run extremely high, thus negating any potential cost savings of choosing arbitration over litigation.

3. There might not be any chance of getting the case dismissed before arbitration. Unless the power is specifically given to the arbitrator, it may be difficult or impossible for the defendant-employer to get the case dismissed prior to the arbitration itself. This will force the defendant-employer to bear the cost of a full arbitration, even if the plaintiff’s claim doesn’t have much of a chance of succeeding.

4. There are limited rights to appeal. Like the plaintiff-employee, the defendant-employer must accept the fact that there is little he can do after an unfavorable outcome.