Advantages and disadvantages of binding arbitration of employment disputes in California

Binding arbitration is the most common type of resolution procedure or employment disputes between employees and employers in California. Contractual arbitration is a process in which the employee and the employer agree to submit their disputes to binding resolution by one or more impartial third persons.

The common perception is that contractual arbitration is better for employers than employees. The theory is that arbitrators are likely to be conservative professionals who will not be influenced by emotional considerations that could sway a jury. In fact, this perception is particularly strong among employment lawyers in San Francisco and Alameda counties where the juries are notoriously liberal and are likely to award significant verdicts, which makes trials of employment cases in San Francisco and surrounding counties particularly desirable to employees their attorneys. Thus, employment lawyers practicing in the San Francisco area study their clients’ arbitration agreements carefully to attempt to find a way to dismiss agreements to arbitrate as unenforceable due to duress, unconscionability and other reasons, in order to avoid arbitration and have a jury trial.

But the perception that arbitrating an employment dispute is better for employers is not always true. Employers with strong legal defenses may do better before a judge than an arbitrator. Where critical facts to a case are in dispute, especially in discrimination and harassment cases, employers with strong witnesses may do better before a jury than an arbitrator, especially if an employee is a poor witnesses and has been already shown to a jury to exaggerate his claims and to be inconsistent about his complaints of discrimination and/or harassment.

It is important to note that high-salaried employees seeking damages may do better in arbitration than in court. Jurors, most of whom are not highly compensated professionals, maybe less sympathetic to a high-salaried executive’s claims for commissions or bonus compensation, especially if that executive earns much higher wages than the jurors themselves.

The other important advantage for employees who sign arbitration agreements is that arbitration service providers generally require the employer to pay all arbitration costs up front. Depending on how long the arbitration is expected to last, the employer may be out of pocket substantial fees, even if the cases settles, which relieves an employee of this substantial expenses, and also encourages employers to consider settling the case instead of potentially wasting money on arbitration with a chance to lose to an employee.

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