Alternative Dispute Resolution

Opinion: Mandatory Employment Arbitration: The Winning Argument

, The Connecticut Law Tribune


One of the hottest topics in alternative dispute resolution these days involves mandatory arbitration requirements in consumer and employment contracts. The fairness of forcing consumers and employees to forego their day in court for arbitration and how such arbitrations are conducted is a question being addressed by legislators, jurists, consumer advocates, corporate America, and almost every ADR provider organization, often involving fierce debate.

The issue is complex. Those supporting mandatory arbitration clauses argue that arbitration provides a better process for small dollar amount claims than does litigation, that the "right to sue" is illusory in such matters and that arbitration actually provides a better chance to have a claim heard by a neutral party in an expedited, cost efficient manner. Detractors claim second-class justice, that the deck is stacked in favor of the corporation and that numerous unfair procedural obstacles prohibit any sense of fairness and level playing field.

However, even those who support mandatory arbitration decry specific practices which appear on their face to be unconscionable. Who could defend an arbitration procedure requiring a consumer to travel long distances to arbitrate a minor claim? Or requiring the expenditure of thousands of dollars in arbitration fees for a small dollar claim? Or requiring submission of a claim to someone selected by the very company being challenged?

Over the past several decades, substantial thought and energy have gone into identifying practices promoting fairness to the consumer or employee claimant. Administering organizations have developed due process protocols to insure procedural fairness. Examples are the American Arbitration Association (AAA) protocols dealing with arbitration selection, training and diversity of panel members and the Judicial Arbitration and Mediation Service ( JAMS) Minimum Standards of Procedural Fairness in Employment Arbitration matters.

One would think that over a period of time, corporations would have hit upon mandatory arbitration practices which would withstand judicial and legislative scrutiny and meet basic due process standards.

And yet, courts continue to be confronted with ever-changing practices introducing new twists and imposing new conditions on the employee or consumer.

A recent case from the U.S. Court of Appeals for the Ninth Circuit illustrates some of the mandatory employment arbitration issues troubling the courts. The case involved a claim by an employee of a grocery company.

The Ninth Circuit upheld a district court decision denying the company's motion to compel arbitration, finding the provisions of the company's arbitration policy to be both procedurally and substantively unconscionable.

Among the objectionable arbitration policy provisions were:

• A prohibition on utilizing AAA or JAMS for administration of the arbitration. (Both services, as pointed out above, have due process protocols.) Unless otherwise agreed to by the parties, the universe of potential arbitrators was limited to retired state and federal judges.

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