The Monkey’s Paw of Forced Arbitration

After a hard fight battle over arbitration agreements, many employers are learning to be careful what they wish for. In the past decade, the U.S. Supreme Court has slowly and consistently empowered forced arbitration clauses. As of last year’s decisions in Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA Inc. and Ernst & Young LLP v. Morris, the court has made clear that employers could not put strict arbitration agreements in their employment agreements but, if written correctly, those agreements essentially shut down any attempt of the workers to collectively sue.

Arbitration isn’t Arbitrary

As expected, employers have cheered and routinely implemented arbitration agreements into more and more employment agreements much to the complaint of labor advocates. The choice seemed obvious; suffer through years of expensive litigation and against a potential collection of thousands of employees, OR take a faster, cheaper route that allowed taking each employee on separately. The conventional advice for several years has been to shoot for the latter and stay away from the federal court on thorny employment claims. But now that employers have reached the finish line on arbitration, many are starting to wonder if it has been worth it.

The Other Side

Take Uber, a company routinely in the spotlight on employment issues given their spearhead market position of using independent contractors to perform their core service. While arbitration is inarguably cheaper on average than a lengthy court case, it also makes bringing the claim far less expensive on the employee. In addition, because arbitrators are not judges, their decisions are not given the same weight as a judicial decision. What does that mean for a company like Uber? Just because it soundly knocks down the first ten claims brought against it in arbitration, it cannot point back to those wins to deal with any new claims, even if they are identical to issues already decided. This has resulted in over 60,000 arbitration cases being brought against Uber, costing a potential $600 million to resolve.

Switching Gears

There is also the social perception of arbitration agreements. As much as the legal system is critiqued in our pop-culture, Americans appear to still greatly value the right to “have their day in court.” While arbitration can arguably favor the employee too, major companies have abandoned or plan to abandon, in part, their arbitration agreements due to highly publicized backlash on the issue. I may be a bit cynical, but I think these companies have discovered arbitration may not be the holy land we have all been led to believe it was but are more than willing to reap progressive points by changing course.