Arbitration or Litigation for Resolving Employment Disputes?

Arbitration or litigation — which approach should your K-12 school use? Over the last several years, many independent schools have chosen to arbitrate employment disputes. Specifically, schools are conditioning employment on the acceptance of contracts that include a mandatory arbitration clause, requiring arbitration to resolve conflicts. While arbitration may seem to save your school significant time and money, this may not always be true.

For example, in a recent United Educators (UE) claim, a California school terminated an instructor for insubordination. The instructor had signed an employment contract requiring arbitration. After his termination, the instructor filed a complaint seeking arbitration, alleging whistleblower retaliation based on workplace safety complaints he made, as well as age and disability discrimination and harassment. Despite objections from the school, the arbitrator permitted a lengthy discovery process involving depositions of more than 30 witnesses and complex document requests. After an 18-day hearing — originally scheduled to last 10 days — the arbitrator ruled in the school’s favor. This win cost the school more than $1.3 million in defense fees, including arbitrator fees, for which the school was solely responsible.

Costs of Arbitration

This claim wasn’t unusual. UE has handled several independent school claims where defense costs for arbitrating employment disputes soared into the high six-figure range. As in the above example, most employment-related arbitration proceedings closely resemble litigation in terms of discovery and motion practice, leaving little savings in time or cost.

When determining whether mandatory arbitration is a good choice for your school, discuss these considerations with legal counsel:

• Appeals: Arbitration offers limited appellate rights. Arbitrations are governed by the Federal Arbitration Act (FAA), which severely narrows circumstances under which the review of an award will be granted. Under the FAA, even a mistake of law is not a sufficient ground for review.
• Dismissal: Due to recent changes in federal pleading standards, some courts are increasingly dismissing employment complaints at the outset. However, arbitrators are more reluctant to dismiss complaints due to the limited appeal rights available to a complainant.
• Jurisdiction: Where your school is located will largely influence whether mandatory arbitration is a favorable alternative. Know whether recent local court decisions support dismissal of claims by motion, since this may make litigation preferable.
• Time to trial: Discuss the length of time it generally takes to get to trial in your jurisdiction. Certain courts steer cases through the litigation process relatively quickly while others have a backlog that proceeds slowly due to strained administrative resources. If you are in a jurisdiction where the latter is true, arbitration may be a better alternative.
• Enforceability: Understand any limitations local courts have placed on the arbitration process. For example, California courts have placed restrictions on arbitration clauses, forcing employers to litigate cases at a greater expense than arbitration. Other courts also have addressed language contained in arbitration agreements which render them unenforceable.

If your school chooses mandatory arbitration to resolve employment disputes, ensure your counsel stays abreast of changes to the laws regarding arbitration and routinely reviews your mandatory arbitration agreements for enforceability.

In jurisdictions where the law is settled on an employment issue and arbitration clauses are generally enforced, or where the resolution of cases is significantly delayed due to congested courts, arbitration may be the best option. Consult with legal counsel to determine the best alternative for resolving employment disputes at your institution.