Employers are always looking for new ways to limit their exposure to employment law claims. Throughout the 1990s and early 2000s, mandatory arbitration clauses in employment agreements were the alternative dispute resolution program of choice. Employers adopting these mandatory arbitration clauses believed that they would get a better, faster, and cheaper resolution of their disputes than they would in court. For many employers, however, arbitration has not been the panacea that they had hoped for. Instead, the arbitration process has often proved to be an unsatisfactory double-edged sword for employers as a result of several specific disadvantages of arbitration.
1. Filing fees and arbitrator fees are expensive. Most employers involved in arbitration are quite surprised how expensive the filing fees and arbitrator fees are. For example, in employment arbitration cases filed with the American Arbitration Association (“AAA”) involving disputes arising out of an employer-promulgated arbitration agreement, the “employer shall pay the arbitrator’s compensation unless the employee, post dispute voluntarily elects to pay a portion of the arbitrator’s compensation.” In addition, in cases before a single AAA arbitrator, “a nonrefundable fee in the amount of $925 is payable in full by the employer, unless the plan provides that the employer pay more.” These costs do not include any costs associated with selecting a location of the arbitration. Even if AAA is not used as a dispute resolution service and the parties select their own arbitrator, an arbitrator’s fee often exceeds $1,000 a day.
2. Arbitrators are less likely to dismiss a claim. Arbitrators have an economic incentive to let the case proceed as long as possible since they are typically paid by the hour. Therefore, many arbitrators are less receptive to employer motions to dismiss employee claims.
3. Lack of appellate review. Another problem with using an arbitrator to decide employment disputes is the inherent lack of meaningful appellate review. An arbitration award is final and binding on both parties unless it is procured by corruption or fraud, the arbitrator was obviously biased or engaged in specific misconduct, or there was no valid arbitration agreement between the parties.
4. Arbitrators frequently “split the baby.” In other words, arbitrators frequently issue a compromise decision, finding in favor of the employee on part of the claim and the employer on part of the claim. One of the main reasons arbitrators do this is because they hope to be selected as an arbitrator in the future. If an arbitrator becomes known for being too employee and/or too employer friendly in his/her decisions, he/she may not be selected as an arbitrator in the future.
As a result of these disadvantages with arbitration, employers have continued their quest to find a better method of limiting their exposure to employment law claims. The newest method utilized by employers to attempt to lessen their financial exposure to employment law claims is the jury trial waiver. Jury trial waivers provide that the right to a jury trial is waived for any claim or cause of action arising under the employee’s employment agreement or out of the employment relationship. Jury trial waivers give employers the benefits of a judicial forum without the expense and uncertainty of a jury trial. In most jurisdictions, after all, it is the jury’s – not the judge’s – unpredictability that concerns employers. Most importantly, however, is the fact that a jury trial waiver avoids the disadvantages of arbitration agreements for employers as discussed above.
As far as filing fees go, unlike with arbitration the employee, and not the employer, is responsible for paying the filing fee at the time the employee’s complaint is filed. In federal court, the filing fee for a complaint is $350.00 with or without a jury demand. In Michigan, for complaints filed in the circuit courts without a jury demand, the fee is $150.00. In addition, unlike with arbitration, neither party pays any fees for the trial court judge in either federal or state court as the judges are paid by the government. Because bench trials are typically slower, less private, and more costly for employees than arbitration, fewer employees may choose to bring a discrimination claim. In addition, because a trial court judge has no economic incentive to let litigation proceed, he/she may be more likely to grant a motion for summary judgment or a motion to dismiss in order to clear his/her docket. Next, unlike with arbitration, an employer that is dissatisfied with a trial court judge’s decision in a bench trial is entitled to a full appellate review. On appeal, the appeals court will review the trial court judge’s findings of fact under a clearly erroneous standard and the trial court judge’s conclusions of law under a de novo standard. Finally, when it comes to deciding cases, a trial court judge is less likely to split the baby since they do not have an economic incentive to be selected again in the future.
While a waiver of jury trial is permissible in the state and federal courts of Michigan, there are strict requirements that must be satisfied in order for the waiver to be enforceable. Employers that are interested in drafting and/or implementing a waiver of jury trial policy should contact their labor and employment law attorneys.
For more information on this or any other labor and employment law topic, please contact Masud Labor Law Group at (989) 792-4499.
Brian Swanson graduated from Wayne State University Law School where he received awards for academic excellence. While attending law school, Brian participated in Moot Court and also served as editor-in-chief. Brian received his undergraduate degree from Grand Valley State University in Allendale, Michigan. Before joining Masud Labor Law Group, Brian obtained extensive litigation experience in both state and federal courts as an associate with a Bloomfield Hills labor and employment law firm.
This article is published by the Masud Labor Law Group, and is intended as general information only. This article is not intended to provide legal advice or opinion, as such advice may only be given when related to specific fact situations. Questions or comments concerning this article should be directed to the Masud Labor Law Group, 4449 Fashion Square Blvd., Ste. 1, Saginaw, Michigan, 48603, (989) 792-4499. E-Mail: firstname.lastname@example.org. ©Masud Labor Law Group 2010. All rights reserved. Reproduction of this article in whole or in part, without express permission from the Masud Labor Law Group is prohibited.