Insight

Eight Ways Arbitration Agreements Can Hurt Employers

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

Why Employers Should Avoid Arbitration
Kraig J. Marton

Kraig J. Marton

November 27, 2018 11:24 AM

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 J. Marton has a unique blend of employment, health care 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, EEO, DOL, and other regulatory requirements.

Related Articles

Connecticut’s “Clean Slate” Act Could Bolster State Workforce


by Gregory Sirico

Best Lawyers weighs in on Connecticut's newly enacted Clean Slate Act and how it's changing the state's employment landscape.

Suited man ascending staircase to overexposed exit

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

Employment Alterations


by Ariel Beverly

As corporate America continues to grapple with pandemic-induced employment shifts, companies are still facing wage-hour compliance issues. Here’s some advice for navigating a post-pandemic work world.

Post-Pandemic Employment Difficulties

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

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

Road to Somewhere


by Mark LeHocky

How can attorneys take steps to improve settlement efforts and avoid unpleasant surprises as they map out a dispute resolution? One litigator-turned-general counsel-turned mediator (with some help from a distinguished rock star) points the way forward.

Improved Dispute Resolution Settlement

What Does Workplace Harassment Look Like in 2021?


by Victoria E. Langley

The COVID-19 pandemic reshaped the U.S. workforce. But has it changed harassment on the job?

Workplace Harassment in 2021

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

A Legal Guide for Businesses During COVID-19


by Roy D. Oppenheim

Oppenheim Law creates a useful guide for problems small to medium-sized businesses may face during this time of uncertainty.

COVID-19 Legal Information for Businesses

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

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

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

The Long, Short, Thick and Thin of It


by Avrohom Gefen

“Appearance discrimination” based on employees’ height and weight is the latest hot-button issue in employment law. Here’s a guide to avoid discrimination.

Woman stands in front of mirror holding suit jacket

Trailblazing Titans of the Industry: Announcing the 4th Edition Best Lawyers: Ones to Watch® in America


by Best Lawyers

Best Lawyers honor and celebrate these talented, innovative newer lawyers who are trailblazing their way to victories in courtrooms across the country.

Connected web above map of the U.S.

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Pearls of Wisdom: Celebrating 30 Editions of Best Lawyers’ Rankings


by Best Lawyers

In celebration of our landmark 30th edition, Best Lawyers’ leadership explains how the world’s original and most trusted legal awards maintain their esteem, integrity and reputation for excellence among the top legal entities and their clients.

Best Lawyers logo for 30th edition release with gold glitter in background

Vanguards of Victory: Best Lawyers: Ones to Watch in Canada 2024


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in Canada™ has been announced, and the lawyers showcased by these awards are rising to the challenge each day as advocates for clients all across the country.

Blue and black background with small squares connected by lines

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

Announcing the 2023 The Best Lawyers in Canada Honorees


by Best Lawyers

The Best Lawyers in Canada™ is entering its 17th edition for 2023. We highlight the elite lawyers awarded this year.

Red map of Canada with white lines and dots

The Best Lawyers in South Africa™ 2023


by Best Lawyers

Best Lawyers proudly announces lawyers recognized in South Africa for 2023.

South African flag

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

IN PARTNERSHIP

How Long Does a Felony Stay On Your Record in California


by Peter Blair

A felony can remain on your record for life in California. Some felonies qualify for expungement. Learn how to remove a felony conviction from your record in California.

Hand setting bird free out of a guarded fence

IN PARTNERSHIP

Thomson Rogers: Toronto Personal Injury Lawyers


by Thomson Rogers

Since establishment in 1935, Toronto-based firm Thomson Rogers has consistently delivered results for their clients struggling through complex litigation.

Top of a Staircase Featuring Two Large Black Doors with Bookshelves and Chairs on Each Side

Incendiary Behavior


by Lyssa A. Roberts and Rahul Ravipudi

California’s future will see more frequent wildfires caused by faulty equipment. Litigation tied to recent Golden State infernos shows the way forward.

Mountain range with glow of wildfires behind it

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset