Faculty & Research
Mandatory Arbitration: Why Alternative Dispute Resolution May Be the Most Equitable Way to Resolve Discrimination Claims
Vol 6 No 9
By: David Sherwyn J.D.
Executive Summary: The number of employers that require employees to agree to mandatory arbitration of disputes as a condition of employment has increased in recent years. One particular motivating factor is an increase in the volume of discrimination claims, which has accompanied the expansion of the employee classes protected by state and federal anti-discrimination statutes. The employers' goals in requiring arbitration are to avoid the expense and time involved in litigation, as well as the specter of unreasonable jury awards. More cynically, critics of mandatory arbitration suggest that another reason that employers favor arbitration is the perception that arbitration works to the disadvantage of employees.
Part of the difficulty in establishing whether one party or the other benefits more from litigation or arbitration is the inherent differences in the cases that reach one forum or the other. An analysis finds no support for the idea that arbitration necessarily favors employers. Indeed, the cost of litigation makes it unlikely that an employee with a legitimate, though small value claim would even be heard in court. Instead, contingent-fee attorneys would tend to stay away from a small claim, while state and federal agencies, notably the federal Equal Employment Opportunity Corporation, have a bias toward settling claims, regardless of the equity of that settlement.
Considering that the best resolution is one that both parties achieve freely on their own, both litigation and arbitration represent a type of systemic failure. Current research has found that arbitration is faster in achieving a resolution than is litigation. There is no way to establish whether payments or damages are higher in litigation than in arbitration, and research has failed to show a bias toward either employees or employers in arbitration. Indeed, establishing bias begs the fundamental question, which is whether a system that favors one side, employees, for instance, is actually more fair than a system in which either side could prevail. Ideally, the system should provide damages for employees who actually have been hurt by discrimination, while at the same time it should provide speedy exoneration for employers who have been unfairly tarred by accusations of discrimination. The present system does neither.
> A case study of a large employer depicts the favorable effects of a program of alternative dispute resolution. Employment at the company in question grew substantially during the study period and the number of contacts to its dispute resolution program likewise expanded. However the percentage of those claims that required outside resources (either mediation or arbitration) was under 10 percent, compared to some 26 percent of claims through the federal Equal Employment Opportunity Commission that end up in court. Likewise the number of days to resolution for Employer 1 was tiny compared to the average 373 for EEOC, and claims paid by Employer 1 averaged one-third of the EEOC average.
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About David Sherwyn J.D.
David Sherwyn (BS, JD, Cornell University) is an associate professor of law at Cornell University's School of Hotel Administration. He is the academic director of the Center for Hospitality Research and a research fellow at the Center for Labor and Employment Law at New York University's School of Law. In addition, Dave is of counsel to the law firm of Shea Stokes Roberts & Wagner. Prior to joining the School of Hotel Administration, Dave practiced management-side labor and employment law for six years.
Dave has published articles in the Stanford Law Review, Berkeley Journal of Labor and Employment Law, Fordham Law Review, University of Pennsylvania Labor and Employment Law Journal, and the Cornell Hospitality Quarterly.
Dave teaches H ADM 387: Business and Hospitality Law, a required class with more than 100 students. In addition, each spring, Dave teaches H ADM 485: Employment Discrimination Law and Union-Management Relations and HA 481 Labor Relations in the Hospitality Industry. Dave received a Hotel School Teacher of the Year Award in 1998, 1999, 2000, 2001, 2002, and 2005, 2007 and 2008. Dave has been nominated for the fraternity and sorority teaching award twelve times and has won the award twice.
In 2002 Dave conceived of, organized, and hosted the Center for Hospitality Research's first Hospitality Industry Roundtable. Because of the success of the Labor and Employment Law Roundtable, the Center now hosts Roundtables in each of the disciplines that are represented in the School.
For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=72
