Member Article

Many employers are turning to arbitration in an effort to avoid the costs and inconvenience of litigation. Before implementing a policy requiring employees to submit disputes to binding arbitration, however, employers should consider the advantages and disadvantages of arbitration, as well as the procedural hurdles that must be overcome before an arbitration policy can be enforced against employees. The Advantages: • Arbitration can be less burdensome to employers. Litigation in court often leads to a lengthy "discovery" process during which a plaintiff can depose witnesses, submit interrogatories, request documents from the employer, subpoena records, etc. In arbitration, however, the discovery process is usually more limited, which means less inconveniences for employers. • Arbitration can also save time. While a court trial can last several days or weeks, an arbitration hearing generally will take less time. This expedited hearing usually means the employer spends less time responding to an arbitration claim than it would responding to a lawsuit. • Depending on the arbitrator’s schedule, an arbitration hearing likely will take place sooner than a trial date would be set. • Thanks to the limited discovery process and expedited hearing, arbitration generally costs less than litigation. • Arbitrators often have a thorough understanding of employment law because they are practicing attorneys who specialize in the field. Judges, on the other hand, must decide a wide array of civil and criminal matters, and thus they rarely specialize in employment law. • An arbitrator is less likely than a jury to be influenced by a sympathetic plaintiff. This means that an arbitrator who rules against the employer may be less likely than a jury to award a large verdict based on emotional factors. Similarly, arbitrators are less likely than a jury to award large amounts of money for intangible damages such as "emotional distress." • With limited exceptions, arbitration decisions are final and binding. Litigation, on the other hand, can drag on due to lengthy appeals. The Disadvantages: • An arbitrator will rarely dismiss a case before the arbitration hearing because a losing plaintiff may challenge such a premature dismissal as a denial of a fair arbitral hearing. In court, however, judges sometimes dismiss a lawsuit before trial. • A disgruntled employee may be more likely to pursue a claim against an employer if arbitration is available because arbitration is more informal than litigation. Furthermore, a former employee need not be represented by an attorney at an arbitration hearing, which increases the chance that a disgruntled employee will pursue a claim if arbitration is available. • Attorneys who serve as arbitrators rely on their work as an arbitrator as a source of income, and thus they are careful to avoid being known as pro-employee or pro-employer. To maintain their reputation for neutrality, arbitrators sometimes "split the difference" by ruling in favor of the employer on some claims while ruling for the employee on other claims in the same case. • Arbitration decisions are final and binding. While this is an advantage of arbitration because it ensures finality, it is also a disadvantage because it is extremely difficult for an employer to appeal an adverse decision. • Arbitration agreements usually require both the employee and employer to waive their right to sue in court. Thus, an employer who wishes to sue an employee must instead take the matter to arbitration. • Arbitration agreements do not prevent a government agency (such as the U.S. Equal Employment Opportunity Commission or Michigan Department of Civil Rights) from investigating civil rights charges or suing an employer. • As a result of limited discovery, an employer may be less prepared than in court to rebut evidence submitted by the employee at an arbitration hearing. • An arbitrator is more likely than a court or jury to order reinstatement of the employee as part of the remedy if the employee prevails. The Procedural Hurdles: Once an employer has weighed the pros and cons of arbitration and decided to implement an arbitration policy, there are still procedural hurdles that must be overcome in order to ensure that the policy is enforceable as a matter of law. Courts have reached different conclusions about which provisions are required and enforceable in an arbitration policy. Employers who wish to implement an arbitration policy should "play it safe" by including numerous procedural safeguards. These include (1) clear notice that the employee is waiving his/her right to sue in court, (2) the right to an attorney, (3) provisions for mutually selecting an arbitrator, (4) right to discovery, (5) right to enforce the award in court, (6) written signed agreement to arbitrate, (7) arbitrator fee paid for by the employer, (8) provision allowing for statutory attorney fees and (9) broad language as to types of claims that must be arbitrated. Deciding whether to implement an arbitration policy at your place of employment requires an analysis of the advantages and disadvantages of arbitration versus litigation. If you decide to implement an arbitration policy, drafting the actual arbitration agreement is a critical step. It is recommended that an employer consult with an attorney before implementing an arbitration policy to ensure that the agreement contains the necessary language so that it is enforceable. Article submitted by Mel Muskovitz, an attorney with the Ann Arbor office of Dykema Gossett PLLC. Previous articles published in Ann Arbor Regional Business-to-Business can be viewed at www.Dykema.com.