Advantages and Disadvantages To Being In Arbitration

Written by Galen T. Shimoda and Justin P. Rodriguez

Employees who took the time to look at some of the new hire paperwork they signed as a condition of being employed may have noticed an arbitration agreement. What an arbitration agreement may mean for you, if you find yourself in a situation where you have legal claims against your employer, is that your claims will not be proceeding in court. Assuming the arbitration agreement is enforceable, you will be bringing your case in what is, essentially, a private dispute resolution system. Generally, you will be able to engage in much of the same litigation tactics as you would in court, e.g., filing pleadings and motions, propounding and responding to discovery, and a final hearing. But, there are some differences worth noting.

Some advantages, in our opinion, is that arbitration is generally a much more informal litigation process that when proceeding in court. First, the parties will typically be able to select an arbitrator that is mutually agreeable. In fact, many arbitration agreements specifically provide that the arbitrator shall be a person that is mutually agreeable to the parties. This has the advantage of enabling each side to do research on potential arbitrators and to vet them to see what, if any, bias they may have. It also helps to ensure that you are able to have a person who is familiar with the law surrounding your case actually decide your case. This is much different from court judges, who may lack a detailed understanding of the legal issues in the unpaid overtime claims or the discrimination claims an employee may bring simply because they are forced to wear too many hats in the underfunded court system.

Second, arbitration can result in a much lower cost than proceeding in court. Courts require a lot of formality when filing paperwork such as motions and pleadings. Arbitrators typically avoid such formality, tending to be more concerned with being practical than anything else, which leads to less expensive litigation in terms of attorney's fees and costs. A third advantage to proceeding in arbitration is the fact that it takes less time to bring a case to final resolution than in court. Arbitration may take only eight months from the time you file to the time the arbitrator issues his decision. This is much, much faster than proceeding in court, which can typically take anywhere from two to five years to get all the way through trial.

There are some disadvantages to arbitration. For instance, you may be less likely to recover large damages than you would had you proceeded in court. From the perspective of a plaintiff, the great thing about proceeding in court is being able to argue your case in front of a jury. Juries typically are mostly comprised of employees, just like you, who will more likely understand just how egregious your supervisors conduct was, how hard it was to support yourself and your family after the termination, and discount any minor issues there may have been with your conduct at work. Simply put, juries are more likely to understand and give the benefit of the doubt to a plaintiff employee suing his employer. With this understanding typically comes a higher damages award and potentially punitive damages. In arbitrations, the arbitrator is usually a retired judge or a very senior attorney who decides not only the liability portion of the case, but also the extent you have been damaged. These individuals may be jaded from seeing so many cases in their career and also believe that you have not suffered as much as in prior cases where only small amounts were awarded. Arbitrators may also be inclined to "split the baby" rather that award you the full amount of damages being asked for. Thus, arbitration can come with disadvantages that directly affect your ability to recover a large damages award.

Another disadvantage is that arbitrations typically restrict the amount of discovery that can be done. Discovery is the process by which the parties are able to obtain information from the other side or other persons regarding the case. In arbitration, the amount of written discovery and the number of depositions to be taken are limited as compared to the amount of discovery (both written discovery and depositions) permitted through the court system.

If you believe you may have claims against your employer and would like to have them evaluated, do not hesitate to contact our office.

The Shimoda Law Corp. legal articles should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents of these articles are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.

Back to Articles