Mandatory ADR? Some findings on Arbitration and Fairness

A short post on the US Empirical Legal Studies blog points to a couple of papers in the Journal of Empirical Legal Studies on arbitration which may be relevant to current debates about mandatory ADR in employment (and possibly family) cases. The abstract for one of the papers particularly caught my eye, as it points to the danger that mandatory ADR mechanisms might be ‘captured’ by repeat-player interests and prejudice the interests of the weaker party. I quote the abstract in full from the JELS site.

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.

As well as the very important substantive point: will forcing mediation or other forms of ADR on parties mean that this is likely to lead to significantly poorer outcomes for them? There is a second issue of some significance, how will the Government monitor outcomes under the programme of ‘behavioural change’ which it is promoting in legal aid, family justice, civil justice and employment tribunals? We almost never see these kinds of study in the UK because the data has to be collected bespoke each time from parties willing to hand it over. This in itself is likely to lead to some selection biases. Whilst lawyers and policy makers scrap over very important primary question, some attention should go into how to ensure the changes are monitored and any ensuing problems identified, evidenced and tackled.  I won’t be holding my breath though.

2 thoughts on “Mandatory ADR? Some findings on Arbitration and Fairness

  1. This morning’s R4 Today programme reported on the mandatory mediation in divorce. The proposal comes across as rather unsatisfactory as it has to be taken together with the curtailment of legal aid in family cases. I’m sure we could begin to see similar results as shown in the JELS employment arbitration awards, not because of repeat player effects but rather because of superior party financial power.

    One question is whether arbitration because it is adjudication is qualitatively different from mediation which is supposed to be consensual?

    The monitoring is essential. But I won’t be holding my breath either.

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