Arbitration Agreements
It has become almost the norm in today’s business world that executive and highly compensated employees will be required to sign an arbitration agreement with their employer. By signing such an agreement an employee waives the employee’s right to a jury trial and agrees instead to arbitrate any claims the employee may have against his or her employer arising out of their employment including claims of discrimination, wrongful termination, defamation, and all other kinds of claims arising out of their employment.
Such arbitration agreements are normally drawn quite broadly to encompass claims that the employee may have against the company’s officers, directors, agents, and other employees of the company. Arbitration agreements are perfectly legal and typically an employee has very little choice of whether or not to sign such an agreement: if you want the job, or if you want to keep the job, you are required to sign the arbitration agreement.
So what is arbitration and how is it different from a civil court case? In a civil court proceeding the case typically is presented to a jury and a civil court judge oversees the case and makes rulings on procedural and evidence issues when necessary. Arbitration is an alternative dispute resolution system in which a case is presented to and decided by an arbitration judge, who may be a retired civil court judge or an experienced trial attorney. Arbitration is a private proceeding conducted with much less formality than a court proceeding. The arbitration judge is selected by the parties to the dispute and if the dispute is an employment discrimination or a wrongful termination case in California, the arbitration judge’s fees will normally be paid for by the employer.
From the perspective of an employee or former employee bringing a discrimination or wrongful termination case, there are a number of disadvantages to arbitration. The biggest drawback is that the arbitration judge will be paid for the time she devotes to the case by the employer, who by the way is the same party the employee is suing! This invariably creates the feeling that the arbitration judge is beholden to the employer in the case, which implies that there is not a level playing field and that the deck is stacked in favor of the employer.
Coincidentally, studies have shown that judgments in arbitration cases are usually lower on average than judgments awarded in civil jury trials. Another significant disadvantage of arbitration is that there are very few restraints on the discretion of the arbitration judge. If her decisions on the case seem wrong there may be limited opportunity to challenge them and appeal rights are limited. Another disadvantage of arbitration is that the opportunities to conduct discovery in the case, such as taking oral depositions, may be very limited in comparison to the discovery available in a civil court case.
Despite all of the drawbacks, if you are an employee who signed an arbitration agreement with your employer you will probably be forced to resolve your discrimination or wrongful termination case through arbitration. So, why not embrace arbitration? You probably have very little choice. A good trial lawyer may be able to turn the tables on an employer seeking to derail employee discrimination and wrongful termination claims by requiring employees to sign arbitration agreements. Keep in mind, the employer must shoulder the cost of the arbitration judge’s fees and they can be very costly, as high as $500 per hour or even more in today’s world. Also, arbitration judges cannot stay in business very long if their decisions are always lopsided in favor of employers. Word gets around about arbitration judges pretty quickly among plaintiff’s lawyers, and an arbitration judge whose decisions are unfair will very quickly find herself without any cases to work on.
A good trial lawyer can usually research the background of the candidates that have been proposed and the lawyer should be able to use the selection process to avoid the appointment of an arbitration judge whose background or past decisions indicate bias in favor of employers. Decisions by the California Supreme Court regarding discovery rights in arbitrations of discrimination and wrongful termination cases have assured that employees will have at least a minimum level of discovery available to them in such proceedings. Although in hindsight an aggrieved employee or former employee may regret the burden of an arbitration agreement, it is nevertheless true that if an employee has a good discrimination or wrongful termination case, he or she may still be able to get justice in an arbitration forum!
