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Who Wins More In Arbitration?

Published by on December 17, 2007

We questioned earlier whether arbitration of employment disputes would be coming to an end soon.  (What is the future of arbitration?)  Perhaps we announced the death-knell of employment arbitrations too soon.  Overlawyered reports here on the win rates in arbitration vs. litigation in employment cases.  Employee advocates may want to reconsider their opposition to arbitration […]

We questioned earlier whether arbitration of employment disputes would be coming to an end soon.  (What is the future of arbitration?)  Perhaps we announced the death-knell of employment arbitrations too soon.  Overlawyered reports here on the win rates in arbitration vs. litigation in employment cases.  Employee advocates may want to reconsider their opposition to arbitration if the reported statistics are accurate.

According to the two studies cited by Overlawyered, employee claimants were more likely to prevail in arbitration:

For example, a study published in the Dispute Resolution Journal compared 125 employment discrimination lawsuits filed in the Southern District of New York, with 186 arbitration claims involving employment disputes in the securities industry. The data showed that employee claimants prevailed 46% of the time in arbitration compared to 34% in federal court. The median monetary award amount was slightly higher in arbitration, and the median time from filing to judgment was 16.5 months in arbitration compared to 25 months in litigation.Also, a 1998 comparison of arbitration and litigation published in the Columbia Human Rights Law Review noted that employees prevailed over employers in 63% of employment arbitration cases filed with the American Arbitration Association between 1993 and 1995. To compare, only 14.9% of employees who brought cases to federal district court in 1994 prevailed in their litigation. The average duration of an arbitrated claim was 8.6 months, compared to 2.5 years in litigation.

Source, citing Michael Delikat & Morris M. Kleiner, An Empirical Study of Dispute Resolution Mechanisms: Where Do Plaintiffs Better Vindicate Their Rights?, 58 DISPUTE RESOLUTION JOURNAL 56, 57-58 (2004); and Lewis L. Maltby, Private Justice: Employment Arbitration and Civil Rights, 30 COLUM. HUM. RTS. L. REV. 29, 45-48 (1998).

This author questions whether the parties achieve significant time and cost savings in arbitration of employment disputes as opposed to litigation.  The greatest cost savings may depend on whether the forum or arbitration agreement permit depositions to be taken as part of the discovery process.  Lawyers handling arbitrations are still lawyers — old litigation habits die hard.  Some large employers have found over time, however, that arbitration of all employment disputes reduces the overall litigation burden on the company.  These economies of scale may not be seen in smaller employers, where employment lawsuits are few and far between.

The time savings may be relative to where the parties would otherwise be litigating the dispute.  In the Eastern District of Virginia, for example, the court attempts to schedule cases to run from complaint to trial in six to nine months, so an 8.6 month average duration for the arbitration process would be the norm here.  Continuances are not unheard of in arbitrations either.

In the end, the employer must make a thoughtful and careful analysis of all factors before deciding whether to adopt an arbitration program for employment disputes.  But perhaps these statistics will quell the urge by some to rush out and amend the Federal Arbitration Act to completely ban arbitration of employment disputes.

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