by Deepak Gupta
Alexander J. S. Colvin of Cornell has just published an interesting and timely new article, An Empirical Study of Employment Arbitration: Case Outcomes and Processes, in the current issue of the Journal of Empirical Legal Studies. The study finds that employees fare worse in arbitration than in court and that employers benefit from a repeat-player effect. Although the study is limited to employment, its findings corroborate persistent fairness criticisms of mandatory arbitration in both the consumer and employment contexts. Here's the abstract.
Using data from reports filed by the American Arbitration Association (AAA) pursuant to California Code requirements, this article examines outcomes of employment arbitration. The study analyzes 3,945 arbitration cases, of which 1,213 were decided by an award after a hearing, filed and reaching disposition between January 1, 2003 and December 31, 2007. This includes all the employment arbitration cases administered nationally by the AAA during this time period that derived from employer-promulgated arbitration procedures.
Key findings include: (1) the employee win rate among the cases was 21.4 percent, which is lower than employee win rates reported in employment litigation trials; (2) in cases won by employees, the median award amount was $36,500 and the mean was $109,858, both of which are substantially lower than award amounts reported in employment litigation; (3) mean time to disposition in arbitration was 284.4 days for cases that settled and 361.5 days for cases decided after a hearing, which is substantially shorter than times to disposition in litigation; (4) mean arbitration fees were $6,340 per case overall, $11,070 for cases disposed of by an award following a hearing, and in 97 percent of these cases the employer paid 100 percent of the arbitration fees beyond a small filing fee, pursuant to AAA procedures; (5) in 82.4 percent of the cases, the employees involved made less than $100,000 per year; and (6) the mean amount claimed was $844,814 and 75 percent of all claims were greater than $36,000.
The study also analyzes whether there is a repeat player effect in employer arbitration. The results provide strong evidence of a repeat employer effect in which employee win rates and award amounts are significantly lower where the employer is involved in multiple arbitration cases, which could be explained by various advantages accruing to larger organizations with greater resources and expertise in dispute resolution procedures. The results also indicate the existence of a significant repeat-employer–arbitrator pairing effect in which employees on average have lower win rates and receive smaller damage awards where the same arbitrator is involved in more than one case with the same employer, a finding supporting some of the fairness criticisms directed at mandatory employment arbitration.
You can access the full article here (subscription only).
In another recent study, Punitive Damages in Securities Arbitration: An Empirical Study, in the Journal of Legal Studies, Stephen J. Choi and Ted Eisenberg reported a decline in investor success in securities arbitrations. Investors received a positive award in 53 percent of arbitrations in 1992 but that figure declined to 32 percent in 2006.
Is there a repeat-player effect in litigation? In collection cases? In small-claims court?
Posted by: Bswolfman | Monday, February 21, 2011 at 08:46 PM