Arbitration: Quick, but dangerous
Litigation is expensive. Court rules on discovery, motions, and trial practice
add complexity to the process, and complexity results in more legal fees.
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Many companies have opted for arbitration as a solution to the litigation
problem. Courts now recognize the validity of arbitration agreements to
adjudicate employment claims, including allegations of discrimination.
The federal courts have favored arbitration in employment matters for decades,
where it is the primary source of dispute resolution between unions and
employers.
One advantage of arbitration is that once the parties select an arbitrator, they
can agree on a date for the hearing.
Another advantage is that discovery (depositions, interrogatories, and requests
for documents) is very much limited, at least compared to court litigation.
One disadvantage is that the parties have to pay the arbitrator, which can be
more than $1,000 a day for conducting the hearing, reading briefs, and writing
a decision. Judges cost nothing, except for court filing fees.
My advice for employers considering arbitration? Don’t do it, don’t do it, don’t do it!
Appeal chances limited
First, arbitration decisions are very difficult to overturn on appeal. While a
judge
’s decision must be based on the evidence and the law, and he cannot abuse his
discretion, different rules apply to arbitrators.
Arbitrators only have to reach a decision that “draws its essence” from the agreement, which can amount to almost anything. Absent evidence of
fraud, it is extremely difficult to show that an arbitrator exceeded his
authority to decide the case.
Defying common sense
Second, arbitrators — perhaps because their decisions are so difficult to overturn — frequently write decisions that defy common sense to reach a particular
conclusion.
I read a decision recently where the issue was whether the employee had lied
when he told his employer that he had
“seen the doctor” on the day he was absent from work. Technically, the employee had not been “examined” by the doctor, but he had waved to him while visiting the office for other
reasons.
The arbitrator, ignoring every intelligent person’s interpretation of what it means to say you have “seen the doctor,” ruled against the employer. The employee, reasoned the arbitrator, did not say
he was examined, and the employer did not ask. Ridiculous.
Believe it or not, such reasoning is a regular occurrence with some arbitrators
that my office regularly tries to avoid. Of course, there are some very good
arbitrators. Unfortunately, they are very busy and very expensive. Arbitrators
with good reputations are always in demand, which leads me to the third reason
to avoid arbitration.
The selection process
Arbitrators need to get selected, usually from lists supplied by the American
Arbitration Association. If they never rule for an employer or a union
employee, word gets around. An arbitrator can reach decisions in an attempt to
be selected in future cases.
Most courts have a set number of judges, and they are assigned in many different
ways. On the other hand, arbitrators need to be selected by the parties, and
arbitrators might try to get more work by reaching decisions that appeal to the
kinds of people who select arbitrators.
Evidence in arbitrations is also easier to get introduced than in court trials.
Hearsay evidence, such as
“he told me that this happened,” gets admitted on a regular basis. So, it is easier for your opponent to prove a
weak case in arbitration.
Costs can mount
Finally, arbitration can get as expensive as litigation, especially if the
arbitrator allows the parties to conduct discovery, or introduce numerous
witnesses during the hearing. Arbitrators still want briefs, and they charge
for writing their decisions.
If someone suggests arbitration as an option, run away. Our courts are not
perfect, but at least you have a chance on appeal when you end up with a poor
judge. A poor arbitrator
’s decision is just as appeal proof as the decision of a great arbitrator.
