The Pros – and Cons – of Arbitration Agreements with Class Action Waivers

In a latest put up addressing the U.S. Supreme Court docket oral argument in Viking River Cruises v. Morianawe talked about that employers in California will need to take into account the “pros and cons” of arbitration agreements ought to an employer-friendly resolution be issued in that case, moderately than rush to implement them.

In response, various folks have requested the identical or related questions — What are the “cons” of arbitration agreements? Why wouldn’t an employer need to use arbitration agreements, notably if they are going to foreclose Personal Legal professional Common Act (“PAGA”) actions in California?

There are “cons” to those agreements — and they aren’t insignificant.

As a result of of these “cons,” many employers throughout the nation have chosen to not implement arbitration agreements.  And lots of employers in California will probably select to not implement them even when an employer-friendly resolution is issued in Viking River Cruises.

Maybe this chart of the “pros” and “cons” can be useful.

  Pros Cons
Class, collective and consultant actions
  • These varieties of large-scale actions with nice potential publicity needs to be foreclosed (until there are points with contract formation or interpretation, the requisite FAA “interstate commerce” just isn’t concerned, or the FAA’s transportation exception applies)

 

Jury
  • Avoiding the unpredictability of a jury
  • Avoiding a call pushed by jury sympathy
  • Avoiding the likelihood of the “runaway jury
  • Arbitrators will be unpredictable, too
  • Arbitrators will be sympathetic, too
  • The chance of the “runaway arbitrator” whose award will probably be exceedingly tough to problem as a result of of the restricted enchantment rights (see beneath) – just like the California arbitrator who awarded a plaintiff $4.1 billion in a wrongful termination case
Enchantment
  • Restricted enchantment rights imply {that a} favorable resolution will probably be last, such that the employer is prone to keep away from further legal professional’s charges and time
  • Restricted enchantment rights imply that an unfavorable opinion will probably be last, too
Discovery and motions
  • There might be much less discovery and extra restricted motions observe in arbitration
  • Relying on the arbitration settlement, the arbitration service and the arbitrator, discovery and motions observe in arbitration might be the identical as in courtroom
Legal professional’s Charges and Prices
  • Legal professional’s charges and prices will be much less if there may be much less discovery and motions observe than in courtroom
  • Restricted enchantment rights imply that appellate charges and prices sometimes can be averted
  • Legal professional’s charges will be nearly the identical as they might be in courtroom relying on the quantity of discovery and motions observe
  • Arbitration prices will be substantial, all for actions {that a} decide would carry out with out further price to the employer
  • Arbitrator’s charges for a single-plaintiff case can exceed $100,000
  • There can be charges for all of the arbitrator’s actions, together with conferences, reviewing briefs, conducting hearings and issuing orders
  • Staff and their counsel can purposefully drive up charges and prices by taking positions that require the arbitrator to intervene
Settlement
  • The proven fact that they won’t attain a jury may incentivize workers and their counsel to be extra affordable in settlement discussions
  • The proven fact that employers must incur vital arbitration prices might encourage workers and their counsel to be extra unreasonable in settlement discussions (e.g., “You’re going to have to pay the arbitrator $100,000 in any event. You might as well give that to us now and avoid paying more attorney’s fees.”)
Employer morale and union organizing results
  • None
  • Obligatory arbitration agreements may create morale points, which in flip may result in attrition
  • Obligatory arbitration agreements will be a difficulty that unions will spotlight in organizing efforts

 

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