Arbitration Bad For Employees

A study of a complete data set of California employment arbitrations by a Cornell professor reveals that employee do worse in arbitration of employment disputes than they do in litigation, particularly vis-a-vis employers that arbitrate multiple employment cases:

The study analyzes 3,945 arbitration cases, of which 1,213 were decided by an award after a hearing, filed and reaching disposition between January 1, 2003 and December 31, 2007. This includes all the employment arbitration cases administered nationally by the AAA during this time period that derived from employer-promulgated arbitration procedures. Key findings include:

(1) the employee win rate amongst the cases was 21.4%, which is lower than employee win rates reported in employment litigation trials;

(2) in cases won by employees, the median award amount was $36,500 and the mean was $109,858, both of which are substantially lower than award amounts reported in employment litigation;

(3) mean time to disposition in arbitration was 284.4 days for cases that settled and 361.5 days for cases decided after a hearing, which is substantially shorter than times to disposition in litigation;

(4) mean arbitration fees were $6,340 per case overall, $11,070 for cases disposed of by an award following a hearing, and in 97 percent of these cases the employer paid 100 percent of the arbitration fees beyond a small filing fee, pursuant to AAA procedures;

(5) in 82.4 percent of the cases, the employees involved made less than $100,000 per year; and

(6) the mean amount claimed was $844,814 and 75 percent of all claims were greater than $36,000. . . .

The results provide strong evidence of a repeat employer effect in which employee win rates and award amounts are significantly lower where the employer is involved in multiple arbitration cases. . . . The results also indicate the existence of a significant repeat employer-arbitrator pairing effect in which employees on average have lower win rates and receive smaller damage awards where the same arbitrator is involved in more than one case with the same employer[.]

From here.

The Arbitration Fairness Act, pending in Congress, would prohibit pre-dispute arbitration agreements in non-union employment contacts.