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To arbitrate or not to arbitrate? That is the question

by David Johnson

Including a mandatory arbitration provision in an employment contract is a trendy thing to do. Is it the right thing to do for your business? Let’s look at some commonly accepted pros and cons of arbitration and dispel some myths.

Arbitration is cheaper and quicker. This is usually true because court cases generally drag out longer and there is more discovery (fact- finding or exchange of relevant evidence). However, certain arbitration agencies are rather expensive (especially when three arbitrators are appointed), and courts have generally required employers to assume all the costs of arbitration for an arbitration agreement to be enforceable.

Discovery is more limited in arbitration. Again, this is typically true. Often, the arbitration contract or the arbitration agency’s rules will significantly limit the number of depositions that may be taken or the amount of written discovery that may be requested. However, arbitrators generally have discretion to relax discovery limitations.

Arbitrators tend to be more employer-friendly. This is very debatable. Certainly arbitrators (typically, attorneys or retired judges) can be expected to be more educated than the average member of a jury. That can be a good thing or a bad thing, depending on the facts. In a race discrimination case involving explosive allegations, an employer may feel much more comfortable in front of an arbitrator. On the other hand, depending on the expected racial composition of the jury pool, the employer could feel it’s better off in front of a jury. In any event, it’s probably true that the chances of a “runaway verdict” are lower in arbitration.

Arbitration is not a matter of public record. This is definitely an advantage of arbitration, particularly for a case that could attract media attention and cause public relations problems.

There is no meaningful right of appeal. This is a legitimate concern. In court, if a trial judge clearly errs, then a party has an automatic right to ask an appellate court to reverse the error. In arbitration, the parties are at the mercy of the arbitrator and have an extremely limited ability to appeal the arbitrator’s determination.

Arbitrators are more prone to “split the baby.” Although it’s a widely held conception that arbitrators like to throw a bone to both sides and try to appease everyone, it’s virtually impossible to test whether that occurs more frequently in arbitration than in court. Many observers believe that employers stand a good chance of achieving a defense verdict in court, but they also stand a better chance of avoiding a sizable verdict in arbitration.

Pretrial dismissal mechanisms are not available in arbitration. This may or may not be true. In court, an employer has measures for requesting that a clearly meritless lawsuit be dismissed before trial (i.e., summary judgment). Some arbitrators and arbitration tribunals recognize those same procedural mechanisms, but others will require that the case go all the way through arbitration. Thus, the net result could be that arbitration is quite a bit more expensive than a trial would have been.

The verdict
Although others may disagree, I typically recommend arbitration to resolve employment discrimination. Despite the disadvantages noted above, most employers would prefer not to have dirty laundry aired in a public court proceeding and would feel more comfortable having an employment dispute adjudicated by an arbitrator who, by age, background, and other socioeconomic factors, may be more inclined to relate to management than to the employee. Plus, arbitrators are less prone to falling for “spin” and wild assertions. It’s not that I don’t like juries; it’s just that I don’t always trust them.

David Johnson is a member of Butler Snow LLP’s labor and employment group in the Nashville office. He focuses on business litigation, employment litigation, noncompete and trade secret matters, appellate issues, and intellectual property litigation. You may contact him at

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