Mediation vs. Arbitration, and Cali employment contracts
Most states, including California, have a process set up for both mediation and arbitration, though the difference between them is not always obvious. Specifically, many employers, particularly companies large enough to be in multiple states, require arbitration of certain claims, and there was a recent Ninth Circuit case on whether or not employers in California can continue to require that employees agree, up front, to arbitrate certain claims in the future. The short answer is yes, they can, subject to further litigation.
Broadly, arbitration differs from mediation by being closer to a court proceeding, all things being equal. Generally speaking, parties going to arbitration must participate, whereas mediation is always considered to be voluntary in nature. The lines here get a bit blurred, because of course the court in California sends many if not most cases to some form of mediation, but the difference can be seen in some of the associated procedures. Arbitration generally requires certain filings from the parties, whereas mediators ask for an impact statement and documents to prepare for a mediation, but can’t force either party to actually file these, and we can’t force anyone to stay at mediation if they’ve decided they don’t want to. Arbitration, again generally speaking, requires more lawyer time and is generally a bit more complicated to get to grips with if you’re not already experienced in alternative dispute resolution. Mediation is designed to be accessible, and the decisions that come out of mediation are co-authored by all the parties; arbitration is like a quicker version of court, and the parties get a decision by the arbiter at the end that they didn’t help write, and which may not cover as many of their concerns. It would be similarly mostly correct to think of a mediator as trying to create an agreement that works for the parties, and an arbiter as trying to lay out what a judge would likely do with the case, if it were filed.
The advantage of arbitration, particularly for an employer, is that it’s faster than litigation and it gives, in a sense, a preview of what the whole case would look like if fully litigated. Most of the time, there is a process in which arbitration decisions can be challenged in court, though it’s difficult to do so if the parties already agreed to binding arbitration, for example in an employment contract. So, an employee who wanted to sue but had to go to arbitration may face an uphill battle if arbitration doesn’t decide in their favor. The company may conclude that, even if the employee can challenge the award in court, the court case is likely to follow a similar path as the arbitration, and the company need not fear a large judgment.
As of now, employers in California can still require that employees agree to arbitration as a condition of employment, since the court found that a federal act pre-empted California’s attempt to prohibit mandatory arbitration clauses. If you are likely to have to go into arbitration, particularly as a result of an employment dispute, it is a very good idea to get at least an orientation from a group experienced in both mediation and arbitration, like Far River. It’s also crucial to make sure you have a good idea of what kind of organization will be doing the arbitration; often employers use firms that are known to be employer-friendly, and if the contract allows you to suggest other arbiters, it’s a good idea to do so. Last, it’s very useful to know some of the weirdly important surrounding facts about employment disputes, like what the timeline for handling complaints from the relevant government agencies are. California often requires what’s called agency exhaustion, meaning that a complaining employee must work through an agency like the EEOC first, before suing. As you would expect, this can take years.
As an employer, it’s good to reflect on the fact that arbitration can be similarly expensive at times, though generally without the substantial delays of a court case. It’s worth considering, particularly for a smaller company, whether it would be cheaper and easier to go to mediation with a disgruntled ex-employee, as the process is more informal and the mediator may be better equipped to get at what the employee is actually mad about and how things could be resolved without further process. One of the dangers of having an employee go through something like an EEOC complaint is that, even if the employee is likely to lose eventually, the company spends a lot of money and time trying to defend themselves, perhaps more than it would have taken to make the employee happy enough to not file in the first place.
In any event, it is likely there will be further litigation on when and how employers can require arbitration in California, but in the interim, we think there are excellent reasons to consider when and where to use mediation instead, and failing that, considering groups like Far River as arbiters. If this information sounds relevant to your situation, consider contacting us for a free and confidential consultation.
