Insight

8 Ways Arbitration Agreements Can Hurt Employers

Arbitration might seem like an appealing alternative, but it could cost you time and money.

 Top Reasons Employers Should Avoid Arbitrati
Kraig J. Marton

Kraig J. Marton

January 16, 2019 12:25 PM

There has been a lot of buzz about the U.S. Supreme Court’s recent decision about arbitration, Epic Systems Corp v. Lewis. It looks like employers can now avoid class actions by having their employees sign arbitration agreements. Indeed, a lot of law firms are rolling out new policies and emphasizing the need to arbitrate.

But is it really a good idea? Probably not. A fully informed employer might choose to avoid arbitration altogether because:

1. It will cost more

The employer almost always will end up paying for the arbitrator’s time. Arbitrators are usually lawyers charging lawyer’s rates. If it is a long case, the fees could be substantial, tens of thousands or even more. It only costs a few hundred dollars to file a lawsuit, and you never have to pay any more court fees of any significance.

2. You can't appeal, ever

People make mistakes, and arbitrators are people. Sometimes even arbitrators get it wrong. When that happens in court or with a jury, you can appeal. Arbitration is final. There is no appeal. You are stuck with whatever the arbitrator decided.

3. You might get bushwhacked

Many arbitrators and arbitration rules limit discovery. You may not get to know what the other side has in mind until possibly 10 days before the hearing, when you just might have to exchange witness lists and exhibits. Court rules include a lot of disclosure and discovery rights. If there is a place for being ambushed, it is in arbitration.

4. You might have to fight just to have an arbitration

It is not a given that you will get to arbitrate just because the employment agreement says so. There are many substantive and procedural defenses to enforcing an arbitration agreement, and there are many occasions where employees would rather fight hard for a chance to litigate in court than arbitrate by claiming that the agreement is unenforceable for one reason or another. You may end up spending a fortune just fighting about your right to arbitrate.

5. You may get in an avoidable fight

It is a lot easier to start an arbitration than a lawsuit. Lawsuits generally require a filing fee, service of process, and a lot more formalities—and most people know enough to hire a lawyer before starting a lawsuit. But an arbitration requires a simple demand and is a lot easier to start, often at no cost to the employee. Many employees may choose to take up the fight with their employer if they know that there is an easy, inexpensive way like arbitration. You may get a fight that you would have avoided if you had required a lawsuit.

6. You may end up in court anyway

An arbitrator has the power to make orders and to make decisions. But an arbitrator can’t enforce them. If you want an enforceable injunction or judgment with the right to collect, you will have to go to court. An arbitration award, standing alone, depends on the good faith of the parties to be enforceable. A court award is enforced by the police and sheriff.

7. Class actions are rare

Class actions are exceedingly rare and not likely for most employers. You may be avoiding a problem that never will come. Most class actions are based on the employer’s failure to pay minimum wage, overtime, or paid sick time. It would be better to simply get sound advice from an experienced employment lawyer to ensure that you are complying with these laws.

8. An ounce of prevention is even better

It’s nice to have an agreement in place to avoid disputes but isn’t it better just to avoid the dispute in the first place? Give some thought into treating employees fairly, listening to their grievances, and being a fair employer. It may make all the difference. Your employee may not want to fight if treated fairly. Sure, arbitration is one way to resolve disputes. But there’s no need to resolve a dispute that hasn’t occurred.

So, if you feel arbitration agreements are the right option for your company, talk to an experienced employment law attorney. It may be that you decide that arbitration agreements are more trouble than they’re worth.

----------

Representing clients for over three decades, Kraig has a unique blend of employment, healthcare, and first amendment law expertise. He has represented both employers and employees in all manners of employment law disputes ranging from FMLA to wrongful termination; from retaliation to discrimination. Additionally, he counsels employers regarding compliance with wage & hour laws, EEOC, DOL, and other regulatory requirements.

Related Articles

Racial Discrimination Suit Against NFL May End in Arbitration


by John Ettorre

A former Miami Dolphins head coach is up against the NLF in a discrimination case that is on a path to arbitration; the NFL remains focused on equality for their diverse coaching staff.

Arbitrating Discrimination Suit Against NFL

Paramount Hit With NY Class Action Lawsuit Over Mass Layoffs


by Gregory Sirico

Animated man in suit being erased with Paramount logo in background

IN PARTNERSHIP

The Immeasurable Impact of Advocacy


by Justin Smulison

Burg Simpson founder Michael S. Burg discusses how the firm’s results transcend the courtroom to improve life for consumers and professionals nationwide.

Lawyer posing in a checker suit

"Lawyer of the Year"


Lawyer smiles while posing for headshot photo

Robin Meadow

Appellate Practice

Los Angeles, CA

2024

A Time for Choosing


by Brandon D. Saxon and Debra Ellwood Meppen

Vast changes in the law, at both the federal and state level, have made it even harder to get through the already dense thickets of employment arbitration. What do businesses need to know going forward?

Suited man holding up falling walls with gray and yellow backdrop

The Great Debate: Do You Arbitrate Commercial Disputes?


by David K. Taylor

In a civil case, is it wiser for a business to try to persuade the counterparty to agree from the outset to arbitration—or potentially to place its very solvency in the unpredictable hands of a judge and jury?

Hand moving multicolor blocks

How A Claim Can Create A ‘Class’ of Its Own


by Justin Smulison

One civil claim can help a victim recover, prevent others from the same harm and even save lives. Tom Connick has experienced this directly, having been at the ground floor of injury claims that have led to high-value class action settlements.

Fire Consuming Paper Money

Measuring Success by Results


by John Fields

Recognized Best Lawyers®* recipient Joseph F. Brophy on how his Firm determines success.

Measuring Firm Success

Destiny Fulfilled


by Sara Collin

Was Angela Reddock-Wright destined to become a lawyer? It sure seems that way. Yet her path was circuitous. This accomplished employment attorney, turned mediator, arbitrator and ADR specialist nonpareil discusses her career, the role of attorneys in society, the new world of post-pandemic work and why new Supreme Court Justice Ketanji Brown Jackson represents the future.

Interview with Lawyer Angela Reddock-Wright

Avon Calling


by Rebecca Blackwell

Nostalgia-soaked childhood memories of the neighborhood "Avon lady" can mask an insidious reality: Multilevel marketing companies are often little more than polished Ponzi schemes. My experience is illustrative.

Multilevel Marketing Is Not Employment

Without Delay


by Ashish Mahendru and Darren Braun

Remote testimony? Virtual evidence presentation? Been there, done that: Why even international arbitration proceedings have, for the most part, weathered the pandemic just fine.

People talking in a conference room

It’s a Gas, Gas, Gas


by Best Lawyers

Michael Polkinghorne discusses why arbitration or mediation is a better option.

An Interview With White & Case LLP

Paula Greisen - Denver 2020 Lawyer of the Year


by Best Lawyers

Litigation - Labor and Employment Denver, CO

Paula Greisen

How to Advise Clients in International Arbitration and Mediation


by Best Lawyers

Karl Pörnbacher discusses how his firm stays at the forefront of advising clients.

An Interview With Hogan Lovells

Options for a Wrongfully Dismissed Employee


by Stacey Reginald Ball

Mediation, Negotiation, Lawsuit

Options for a Wrongfully Dismissed Employee

An Interview With Egorov Puginsky Afanasiev & Partners


by Best Lawyers

Russia's 2020 "Law Firm of the Year" in Arbitration & Mediation Law

An Interview With Egorov Puginsky Afanasiev

Trending Articles

2025 Best Lawyers Awards Announced: Honoring Outstanding Legal Professionals Across the U.S.


by Jennifer Verta

Introducing the 31st edition of The Best Lawyers in America and the fifth edition of Best Lawyers: Ones to Watch in America.

Digital map of the United States illuminated by numerous bright lights

Unveiling the 2025 Best Lawyers Awards Canada: Celebrating Legal Excellence


by Jennifer Verta

Presenting the 19th edition of The Best Lawyers in Canada and the 4th edition of Best Lawyers: Ones to Watch in Canada.

Digital map of Canadathis on illuminated by numerous bright lights

Discover The Best Lawyers in Spain 2025 Edition


by Jennifer Verta

Highlighting Spain’s leading legal professionals and rising talents.

Flags of Spain, representing Best Lawyers country

Legal Distinction on Display: 15th Edition of The Best Lawyers in France™


by Best Lawyers

The industry’s best lawyers and firms working in France are revealed in the newly released, comprehensive the 15th Edition of The Best Lawyers in France™.

French flag in front of country's outline

Presenting the 2025 Best Lawyers Editions in Chile, Colombia, Peru and Puerto Rico


by Jennifer Verta

Celebrating top legal professionals in South America and the Caribbean.

Flags of Puerto Rico, Chile, Colombia, and Peru, representing countries featured in the Best Lawyers

Unveiling the 2025 Best Lawyers Editions in Brazil, Mexico, Portugal and South Africa


by Jennifer Verta

Best Lawyers celebrates the finest in law, reaffirming its commitment to the global legal community.

Flags of Brazil, Mexico, Portugal and South Africa, representing Best Lawyers countries

Announcing the 13th Edition of Best Lawyers Rankings in the United Kingdom


by Best Lawyers

Best Lawyers is proud to announce the newest edition of legal rankings in the United Kingdom, marking the 13th consecutive edition of awards in the country.

British flag in front of country's outline

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Announcing the 16th Edition of the Best Lawyers in Germany Rankings


by Best Lawyers

Best Lawyers announces the 16th edition of The Best Lawyers in Germany™, featuring a unique set of rankings that highlights Germany's top legal talent.

German flag in front of country's outline

Celebrating Excellence in Law: 11th Edition of Best Lawyers in Italy™


by Best Lawyers

Best Lawyers announces the 11th edition of The Best Lawyers in Italy™, which features an elite list of awards showcasing Italy's current legal talent.

Italian flag in front of country's outline

Tampa Appeals Court ‘Sends Clear Message,” Ensuring School Tax Referendum Stays on Ballot


by Gregory Sirico

Hillsborough County's tax referendum is back on the 2024 ballot, promising $177 million for schools and empowering residents to decide the future of education.

Graduation cap in air surrounded by pencils and money

Find the Best Lawyers for Your Needs


by Jennifer Verta

Discover how Best Lawyers simplifies the attorney search process.

A focused woman with dark hair wearing a green top and beige blazer, working on a tablet in a dimly

Key Developments and Trends in U.S. Commercial Litigation


by Justin Smulison

Whether it's multibillion-dollar water cleanliness verdicts or college athletes vying for the right to compensation, the state of litigation remains strong.

Basketball sits in front of stacks of money

The Human Cost


by Justin Smulison

2 new EU laws aim to reshape global business by enforcing ethical supply chains, focusing on human rights and sustainability

Worker wearing hat stands in field carrying equipemtn

Woman on a Mission


by Rebecca Blackwell

Baker Botts partner and intellectual property chair Christa Brown-Sanford discusses how she juggles work, personal life, being a mentor and leadership duties.

Woman in green dress crossing her arms and posing for headshot

Introduction to Demand Generation for Law Firms


by Jennifer Verta

Learn the essentials of demand gen for law firms and how these strategies can drive client acquisition, retention, and long-term success.

Illustration of a hand holding a magnet, attracting icons representing individuals towards a central