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    December 2017

    Arbitration or Litigation for Resolving Employment Disputes at Independent Schools?

    Arbitration or litigation – which approach should your 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 institutions significant time and money, this is not always 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--which was originally scheduled to last ten days--the arbitrator ruled in favor of the school.  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 was not 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, today most employment-related arbitration proceedings closely resemble litigation both 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 the 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 – The jurisdiction in which 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 other courts have a backlog of cases which proceed 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 your 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 have also addressed language contained in arbitration agreements which render them unenforceable.  

    If your school elects mandatory arbitration as the method to resolve employment disputes, ensure your counsel stays abreast of the changes to the laws regarding arbitration, and routinely reviews your institution’s 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 are significantly delayed due to congested courts, arbitration may be the best option. Consult with legal counsel to determine the best alternative for resolving inevitable employment disputes at your institution.


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