Employment Arbitration Statistics: Is it Working?

Looking at employment arbitration statistics, it is easy to see a surge of workplaces implementing arbitration to resolve employment disputes within the company.  Finding the best option for resolution on a given dispute is an art, and employment disputes are no different. The process of arbitration can be beneficial for companies looking to resolve employment disputes effectively and quietly.  It can also be helpful for employees looking to preserve the relationship with their employer and save time and money on resolving the dispute.  However, the process can present challenges if the employee needs outside attention to help resolve issues on a company-wide level or if there are issues that would benefit the public.  There are many opinions about the use of arbitration, especially when the arbitration is mandated by employment contracts, as it can bring up questions of voluntariness.  However, based on studies throughout the US, many companies are turning to arbitration in some form to solve disputes.

This topic will be covered in two articles examining the process of employment arbitration and how it is being used.  The first article will briefly discuss the arbitration process and the types of disputes that are often solved through employment arbitration.  It will also begin to discuss some of the organizations that are the most active in employment arbitration and the numbers they are seeing.  The second article will continue the discussion of the different organizations that provide employment arbitration or encourage it and will then discuss the benefits and drawbacks of using arbitration to resolve employment disputes. This set of articles aims to broaden the understanding of employment arbitration and help both employers and employees make informed decisions about arbitration.    

An Outline of Employment Arbitration

As companies have begun to use arbitration to resolve disputes, there has been a learning curve with many participants to understanding the process and adapting the process for employment disputes.  This section will serve as an overview of the process to help parties understand what will happen should they choose to use arbitration to resolve their dispute.  Arbitration, like other alternative dispute resolution mechanisms, is a voluntary process used to resolve disputes.  Arbitration is the most formal of the dispute resolution mechanisms.  The parties present their case before the arbitrator or panel who listens to the evidence and issues a decision called an award.  The parties will then be bound by this decision and it will be enforced.  The process usually involves the following characteristics.

  • Agreement: As mentioned above, the arbitration process is voluntary and the parties must agree to participate.  This can be a blanket agreement in a contract—in this case, an employment contract—or it can be done in an agreement after the dispute has arisen.  Many companies have begun to include mandatory arbitration clauses in their employment contracts, which can be problematic when the employee has little to no bargaining power, as will be discussed in the drawbacks later.  However, when voluntary, this allows disputes to be resolved quickly.
  • Appointment: Once a dispute has been submitted to arbitration, the arbitrator will be appointed.  The process for this may be laid out in the agreement or it may be set out by the organization to which the arbitration clause submits the dispute. The arbitrator or arbitrators will usually be appointed by agreement of the parties.  If there are three arbitrators, each party usually appoints one, and the pair appoints a third. Otherwise, the arbitrator will be appointed by the organization.  The important thing to remember in the appointment process is that the goal is to appoint a neutral third party that is not interested in any way in the matter.
  • Discovery: Usually, arbitration gives the parties a chance for discovery.  This means that the parties will have time to gather and find evidence.  They may also usually review the evidence brought by the other party and counter it.  The arbitrator will usually set a timeline and require that all evidence be exchanged.
  • Hearing: If the parties would like to present witness testimony, the arbitrator will usually schedule a hearing where the parties present their evidence and question witnesses, much like traditional litigation.  However, an arbitration hearing will be less formal and have looser rules for the submission of evidence.  This hearing may last for a short time or may continue over a few days depending on the dispute.
  • Award: An award is a decision issued by the arbitrator.  If the parties did not wish to present witness testimony, this may be decided based only on the written admissions of the parties.  If the testimony was presented, the arbitrator or panel will issue an award based on the evidence presented.
  • Enforcement: After an award is issued, it will need to be enforced.  This can be done through the legal system or between the parties.  However the award is enforced, it will stand as a judgment between the parties and be a binding decision.

This process is very similar to standard arbitration.  However, there are differences in rules and procedures depending on the organization that creates the process for the arbitration.  Another important distinction in employment arbitration is that the arbitrator will usually have experience in employment disputes and labor law.  This allows the arbitrator to use their knowledge and experience to see the full dispute and understand the underlying interests and needs to give the parties what they need to move forward.  Finally, employment arbitration requires that due process in the employment dispute be honored, as employees may have due process rights to retain their jobs.

Types of Employments Disputes

Employment arbitration typically handles the resolution of disputes that involve the employee-employer relationship and grows out of the contract between the two in some way.  There are many different disputes, but the most common ones are:

  • Wage Disputes: If an employee believes that they are not being properly compensated, they may bring a wage dispute.  This can also arise when the employer believes that the employee is not doing the amount of work required for the job, so they believe the employee is being paid too much.
  • Severance: When employees are terminated, they may be offered a severance package, This usually involves compensation for signing a nondisclosure or noncompete clause. Disputes arising out of a failure to comply with one of these agreements may be arbitrated.
  • Wrongful Termination: When an employee is wrongfully terminated, they may bring a termination lawsuit against their former employer.  These claims may be brought in arbitration, but this requires careful consideration of the process and an analysis of whether this type of termination is a common practice in the company requiring that the public knows of the practice.
  • Discrimination: When employees have arbitration clauses in their contract, they are often required to submit discrimination and harassment claims to arbitration.  However, this behavior is often the result of an unchecked and unequal balance of power, so it may not be a voluntary process.  These claims must be handled with extreme care and the arbitrator must be independent and neutral to make these claims fair.

It is important to note that arbitration required by employment agreements does not apply to labor disputes, as these disputes are often decided through a separate dispute resolution mechanism and administrative agency.

Organizations Providing Arbitration

When discussing arbitration in the realm of employment disputes, it is important to also note the organizations and agencies that handle employment disputes and arbitration.  While many alternative dispute resolution organizations have rules and procedures for arbitration proceedings, a few organizations have created procedures specifically designed for employment disputes and the protection of the employees’ due process rights.  These procedures focus specifically on the rights and remedies that will need to be preserved for the employees and their employers and encourage fair and equitable arbitration for employment disputes.  Three main organizations will need to be discussed as a process to resolve a dispute—CPR, AAA, and EEOC.

The International Institute for Conflict Prevention & Resolution

The International Institute for Conflict Resolution & Prevention (CPR) is a nonprofit organization that promotes new, effective, and creative ways to prevent and resolve conflict around the world.  The organization is divided into the CPR Institute, which is the organizational think tank devoted to creating the best practices for dispute resolution, and CPR Dispute Resolution, the arm of the organization that provides dispute management service and training and education.  Both of these groups within the organization have had a direct impact on the development and implementation of CPR’s employment arbitration practice and continue to create the best practices for employment arbitration.

CPR has recently created the CPR Administered Employment Arbitration Rules and will begin using these rules exclusively in employment arbitrations administered through CPR beginning on July 1, 2021.  These rules are created to specifically protect due process for employees by requiring that the arbitration meet CPR’s Due Process Protocols and protect the claims of each party in a multiple claimant suit.  They require confidentiality and allow the arbitrator to suggest settlement or mediation if they believe the parties may benefit from such a process.  To use these rules and their benefits, the parties must agree to have their disputes decided by CPR’s procedure.

Conclusion

Employment arbitration is becoming an increasingly popular way to resolve workplace disputes from wage disputes to terminations.  However, the process is not always beneficial to all employees involved.  The balance between using arbitration efficiently and effectively and protecting the rights of employees is an important balance to strike.  This is the one that these organizations are attempting to gracefully find.  The next article will focus on two other organizations and their role in employment arbitration, as well as the benefits and drawbacks of using arbitration to resolve employment disputes.

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