From time to time, employers will ask their attorney about whether to require employees to enter arbitration agreements, so that any employment dispute will be resolved by an arbitrator rather than litigated in court. There is no clearly right or wrong answer to this question, but for most of our employer clients, a thoughtful consideration of the relevant factors will persuade the employer to dispense with arbitration agreements, and trust in the courts to resolve any such disputes.
One of the primary reasons for trusting in the courts and not opting out for private arbitrated resolutions is that many employment law claims can be reliably resolved by summary judgment procedures, which do an effective job of discarding cases where the employee does not have the requisite proof necessary for the elements of the claim. While most arbitrators should also rule in favor of the employer if the case is one that should end with summary judgment if it had been in court, there is no effective relief to the employer if the arbitrator instead favors the employee. If the employer then seeks to have the arbitration award vacated by a judge, it will find it very difficult to persuade the court to do so.
A cautionary tale which illustrates these concerns is provided by the recent decision of the United States Court of Appeals for the Eleventh Circuit, which resolves federal appeals from United States District Courts in Florida, Georgia, and Alabama. In Gherardi v. Citigroup Global Markets, Inc., Case No. 18-13181 (11th Cir. Sept. 17, 2020), the employee was awarded $3,452,000 by the arbitration panel. On subsequent review, the District Court set aside the award as being contrary to law. On appeal, it appears that the three member panel agreed that a different result would likely have followed if the dispute had been litigated. But as the majority concluded, error by the arbitrator is no basis for vacating an award.
Not one member of the judiciary (one district judge, and three appellate judges), tried to defend the arbitration award on its merits. Had the case been subject to resolution by the federal courts without having gone through arbitration, the outcome would likely have been different. But because the employer had required the employee to enter an arbitration agreement, it was stuck with the outcome of the arbitration, and had no effective procedure to challenge a questionable result.
Employers may have persuasive reasons to opt for arbitration of their employment disputes. They can be cheaper, quicker, and allow for a confidential process. But the Gherardi case shows that arbitration is not necessarily friendlier to employers than judicial proceedings would be, and may be less so. Courts are bound by precedents, and subject to appellate review. But if the case goes wrong in arbitration, the courts will be unlikely to grant relief to the employer based on arguments about the merits of the decision.