As an attorney who has spent her career representing both employers and employees, I have mixed feelings about arbitration. My default advice for employers would be that arbitration is better for business. My default answer for employees would be that arbitration is not ideal, and every worker should try to negotiate out of mandatory arbitration at the start of employment. But, like every good rule, there are always exceptions.
The Employer’s Perspective
Arbitration is attractive to employers because it keeps disputes in a more private setting, limits costs, and is less likely to result in punishing punitive damages being awarded. Arbitration agreements typically include class action waivers that also give employers another layer of protection. The same benefits to employers can seem like drawbacks for employees. Publicity, cost, and future potential payouts can all be leveraging points for an employee who has suffered discrimination, retaliation, or some other employment-related harm.
Where the Law Stands
The U.S. legal system favors arbitration as a means of reducing court congestion, lowering costs, and speeding up litigation. There are minimal exceptions outside of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021(EFASASH), which prohibits employers (and other entities) from forcing arbitration of sexual assault and sexual harassment claims. Except where EFASASH applies, courts will generally compel arbitration.
If all of this sounds dreary on the employee's side, you are mostly right. Established executives may be willing to put everything on the line and risk their reputation for public justice and a big payout. But workers at the beginning and middle of their careers often have far more to lose in litigation. Public legal battles can be a red flag for future job prospects, and employers being sued often target employees’ reputations in court.
Arbitration Advantages for Employees
Having privacy can actually work to the worker’s benefit, and having a choice in who will be deciding your case can be advantageous for employees. Most employment arbitration agreements require that the employer pay the arbitration fees. As a result, the employer bears more expense than the employee, and cost remains a key leverage point for the employee. Most arbitration companies also provide mediation services, and I have generally found private mediation services to be more effective than agency or court mediations.
The Bottom Line
Assessing whether arbitration is a benefit or a risk for an employee depends on the arbitration service being used, the arbitrators that participate in that forum, and the particulars of the claim. Employees need to understand the terms of the arbitration provision to which they agree to or have already agreed.
There is no one-size-fits-all approach to litigation, and there is no clear right or wrong answer for whether to arbitrate. Being able to quietly address a dispute should be a choice for all sides, and having a realistic path to resolution is an ultimate win for all parties involved.
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