Is Arbitration Good or Bad for Employees?

justice-for-sale1.jpgAnswer: Bad.

This question is often debated among attorneys, judges and arbitrators. Judges like arbitration because they’re chronically overworked. For instance, the U.S. District Court for the Central District of California had the honor of being the second busiest federal district court in the entire country, with 11,585 civil cases filed in 2006 alone. Judges view arbitration as a way to get disputes out of their overburdened courts. Arbitrators love arbitration because they charge lots of money. And some (but not all) defense lawyers like arbitration for exactly the same reasons most employees should run away from arbitration.

What is Arbitration?

But before we get to that, what is arbitration? It is a way to resolve legal disputes between parties outside of the court system by hiring a paid referee who acts as the parties’ private judge.

Here are the main ways in which arbitration differs from lawsuits:

1. A judge gets his salary from the State of California. An arbitrator gets paid by the parties (that means YOU), and the bill is usually a whopper.

2. Like a judge or jury, an arbitrator’s decision is binding on the parties. But unlike a judge or jury, if you think the arbitrator made a serious mistake, you CAN NOT appeal it (except in a few extraordinary cases). You’re stuck.

3. Arbitrations are decided by one person, the arbitrator. You can’t request a jury.

4. The arbitrator does not need to be a lawyer (although most tend to be lawyers or retired judges).

5. Arbitrators can set and change all the rules outside of those, if any, which the parties have specifically agreed to. Judges are bound by detailed codes of procedure, rules of court, etc.

6. You and the other parties get to pick the arbitrator. You can’t pick a judge, the court assigns you one when you file your lawsuit.

Why Is Arbitration Bad?

Now, here are the reasons why arbitrations are a bad thing for you, the employee.

1. You could be on the hook for the arbitrator’s fees, especially if you lose. What kind of fees are we talking about? A lawyer told me her client just went through an arbitration regarding a claim worth $100,000. They lost and her client had to pay $60,000 in arbitration fees. Ouch!

2. Arbitrators can limit you in crazy ways which prevent you from proving and winning your case. I heard about one arbitrator who ruled that the plaintiff would not be allowed to conduct any depositions or introduce witnesses. Not even one. For employees who need to rely on witnesses to give critical testimony about what happened, which is probably many of you, you can kiss your case goodbye. Even if you get a good arbitrator, you will still be much more restricted in your ability to gather evidence, request documents from the other side, or conduct witness interviews than you would in court. This hurts the plaintiff (who has the burden to prove her case) and helps the defendant.

3. Arbitrators tend to favor the employer. Why? Simple economics. Big companies are likely to be sued again, so they are more likely to be repeat customers for arbitrators. You the employee are just one individual whom the arbitrator will probably never see again. Statistics have overwhelmingly shown that arbitrators rule more often in favor of the employer against the employee. This keeps the employer coming back for more arbitrations.

4. Arbitrator awards tend to be much smaller than what you might get from a jury. Many arbitrators end up cutting the baby in half. If you are seeking $10,000 and the other side is offering $0, some arbitrators split the difference and award $5,000. This raises the question, did you really need a high-priced arbitrator to do that for you? Arbitrators are also less likely to award punitive damages, designed to punish the wrongdoer, than courts. This hurts because punitive damages can in some cases be bigger than the rest of your damages combined.

5. Arbitrations are hush-hush and confidential. This is great for the employer who doesn’t want its dirty laundry aired in public, which is what happens in a lawsuit. Why does this matter? Public embarrassment is often a powerful threat which employees can use to get employers to come to the negotiating table and settle a dispute.

Can You Avoid Arbitration?

Unfortunately, in many cases, you won’t have a choice about arbitration. Chances are, when you were hired, your employer asked you to sign an arbitration agreement. Which you then promptly forgot about. Or the arbitration agreement may have been contained in the employee handbook which you signed when you received it. If that’s the case, even if you file a lawsuit in court, your employer could drag you kicking and screaming into arbitration by filing a motion with the court telling the judge, hey, we’ve got an arbitration agreement! The judge, being very overworked, will quickly agree and ship you out of his court and into the hands of the waiting arbitrator.

You may still be able to challenge the motion, though. For instance, there is an important California Supreme Court decision called Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 which said that arbitration of employment disputes may be denied where the arbitration agreement is “unconscionable” or “fundamentally unfair”.

Also, if you have discrimination, retaliation or medical leave claims under the Fair Employment & Housing Act, Armendariz imposes special requirements on arbitration:

1. Arbitrator must be neutral

2 .Discovery must be adequate

3. Plaintiff must be permitted to recover all types of relief otherwise available in court (monetary damages, injunction, reinstatement, etc.)

4. Final arbitration award has to be issued in writing so as to permit limited court review

5. Employer must pay arbitrator’s fees and all costs unique to arbitration

BUT, these special requirements don’t apply if “an employer and an employee knowingly and voluntarily enter into an arbitration agreement AFTER a dispute has arisen.”

Contact an Attorney

This is exactly why, you should contact an attorney right away if you think you have an employment-related claim. Among other things, he’ll stop you from entering into that arbitration agreement your employer is waving in front of your face after you just complained about racial discrimination.

Here’s to hoping you can stay out of arbitration.


  1. Sarvani Maheedhara on September 28, 2022 at 5:23 pm

    Exactly, I also feel sometimes the heinous attacks or crimes by the perpetrators and predators will be hidden at the cost of innocent people’s loss. Rich (Be it an employer or a company) will not be always rich my friend, truth always wins! Slowly and steadily. Putting our lives in Risk, danger and threatening us would make them win? Never!!!

    • Sarvani Maheedhara on September 28, 2022 at 5:24 pm

      Or even a Gang or Group of colleagues

    • Sarvani Maheedhara on September 28, 2022 at 5:52 pm

      And, believe there is a superpower beyond the rich, never get disheartened, have faith and believe and things turn out into the innocents favor. No pain (women’s especially, as I am a feminist 😜) goes in vain.

  2. Luz Delvalle on October 17, 2020 at 6:52 am

    On feb 18,2020 I filed eeo charges in the workplace eeo.abd disability discrimination.i have never been written up in 13 plus years I’ve worked for these ppl,tho I was warned by fellow employees to drop the charges and forget what happened I was also told there are loop holes, whatever that meant.i knew in my heart the facts of what I have been subjected to and why my previous charge last year, they found no probable cause, I knew one person throwing subliminal messages to me was retaliating and mentioned protected confidential info of eeo, he should have not known about,he was retaliating because he has been giving me work assignments and distribution of overtime to only one I had a meeting with him and manager about him giving me work and I need to protect myself and job and the title he has is shop steward and her answer was( luz I know he is always with us up here but he helps us. I asked her if she wants me to take his orders then she has to verbally tell me.Now on Jan 2 2020 and feb 2020 I was sexually harassed my a male coworker and when I texted my manager what happened and I’m truly scared to report it, she guided me via text to do so.then got extremely upset I filed with eeo. 1-eeo has not processed my claim since. 2- I tried reaching out to her on severe retaliation to explain why I believe this , but she tells me she is very busy 3 I was accused of driving reckless and I called eeo via email, that they will try to make me look incompetent or unstable, but she didn’t return my call this may.4 I was instructed by labor relations to submit to a pscological evaluation in which I did , this dr was a former consultant to my work place and based on this, she stated on her letter I must return to duty I am fit and based on her findings it is plausible they do a thorough investigation on my charges I am being labeled ppl that don’t like to be a witness and were mentioned in my report are part of the ones that were making false claims against me.5- when I returned to duty they finally gave me an accommodation I’ve asked for years and was denied.and that was to drive a bus 6 hours straight picking and dropping passengers from September 8-to September 22 6-on the 2nd they tried to make me resign on a stipulation they had ready.labor relations said I’ll pay you until nov 1 or Dec 1 to think about it,I told her give me sometime to look at this. She said ok. 20 minutes later she sends me an email to return my badge and parking pass until a prehearing that took place oneseot 30th. My delegate was present,he told them ( my client is entitled to sec7:5 collective bargaining agreement and will go to arbitration. Tho my union is representing me,there are eeo charges I filed and basically this is all retaliation for me doing so.i was so desperate I never made any false allegations on anyone I know the seriousness that comes with it.and because of me being called idiot stupid bitch and worst,I recorded the conversation between me and my sexual harasser because he had gotten a tip that I filed charges and harrassed me also leaving me a message calling me a rat after denying it and cursing me he implicated himself in this recording i also recorded the person retaliating on me, talking to management on my disability and I should not be fit for basically they trying to get rid of me so the charges can go away too.because manager is entertaining someone on breaking the hipa law.and this person was saying things that I only told EEO eeo is employed y the same corporation I work for I filed this year and I believe she is taking her time to let the statute of limitations run out. I need an attorney for eeo on not processing my claim can you tell me where I can get a pro bono attorney I’m without pay

    I am on suspension without pay , waiting on arbitration we are fighting against an insubordination charge,

  3. Mark R on September 18, 2015 at 1:41 pm

    I am gaining employment in California with a company that is based outside of California. Their arbitration agreement states that arbitration must happen in their state and governed by the laws of their state. The arbitration cost is a 50/50 split. If I sign the agreement, is it valid in California? Based on what I am reading this is not legal because it has to be governed by the laws of California. Can somebody provide information on this and possible California laws pertaining to it so I can ask for it to be modified?

  4. Amy on September 11, 2013 at 4:54 pm

    I thought under California law that employees are not required to pay an arbitrator’s fee under a valid arbitration agreement. But you do have to split the fee if you want a court reporter there, and that’s an incredible $1,000 per day (total).

  5. porkandbeaner on January 23, 2012 at 2:05 pm

    An arbitrator completely ignored the dishonesty and criminal misconduct of police officers who testified against a railroaded officer.  They fired the cop for a simple verbal remark!  Then during civil litigation, they found out the cop was telling the truth.

  6. sme on July 14, 2010 at 4:32 pm

    Arbitration may also be used to manipulate the statute of limitations.
    At the University of San Francisco (a Jesuit institution not controlled by Jesuits which has been sued numerous times for labor violations), two Latino professors were made to wait 3 years by the Faculty Union before facing arbitrators and agreed to wait that long because their cases against the university were so strong. Then, after the statute of limitations to sue in a law court had expired, two separate arbitrators made their entry and quickly ruled against the two professors in two separate arbitrations issuing simply abominable decisions.
    Lesson: Stay away from so-called “neutral” arbitrators. As reported by the Washington organization Public Citizen, arbitrators usually rule in favor of the stronger and wealthier party, not the party who is right. Be very careful about Unions that “promise” to support you, too.

Leave a Comment