Monday, July 7, 2008

Employment Arbitration: Bad for Employees

Employment arbitration is a way of resolving dispute by and between an employer and employee outside of the court system by hiring someone who acts as the parties’ private judge.

Sadly, employees do not have much choice on arbitration. Upon hiring, employees are made to sign an arbitration agreement or the same may have been contained in their employment handbook.

However, in the case of Davis v. O'Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007), the 9th U.S. Circuit Court of Appeals invalidated an arbitration agreement covering all employees of an international law firm on grounds that it was procedurally and substantively unconscionable under California law.

I say, employment arbitration is bad for employees for these various reasons:

  1. The parties pay for the arbitrator.

    Financially, an employee is no match for the resources of the employer. Win or lose, the poor employee has to shell out money.
  2. Arbitrators may set limitations, which will prevent an employee to prove and win his/her case.

    Even if the parties hire a good arbitrator chances are your ability to gather evidence, request documents from the other side, or conduct witness interviews may be restricted.
  3. Arbitrators often favor the employer.

    Most likely, arbitrators have arbitrated in a previous case involving the same employer and another employee. The arbitrator and employer have already gained familiarity with each other.
  4. Arbitrator awards tend to be much smaller than that of a jury.
  5. Arbitration is confidential.

    This is an advantage on the part of employer. Their dirty laundry will not go public.