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Arbitration: not a silver bullet

Arbitration: not a silver bullet

By Leah Nicholls, Kazan-Budd Attorney

Last week, I traveled to Rockville, Maryland, to speak with the employment law section of the Montgomery County Bar Association. The topic was arbitration agreements in employment contracts. We discussed the types of arbitration clauses that make an arbitration agreement vulnerable to challenge, as well as the latest news about major pending cases.

A number of lawyers talked about their experiences fighting arbitration clauses in their local courts, and I was troubled by what they told me. They reported that, in a number of cases, trial judges had sent their cases to arbitration despite clear, binding precedent from Maryland’s highest court to the contrary. The lawyers said they didn’t bother appealing those decisions primarily because getting a ruling from the intermediate appellate court would take too long.

Although we haven’t heard of this happening in other jurisdictions, if their experiences are representative of how Maryland courts treat arbitration clauses, that’s extremely problematic. We’d encourage anyone facing a similar issue to reach out to us for help.

The lawyers I spoke with had a couple other interesting observations that might make an employer think twice about including arbitration agreements in their employment contracts.

First, in their experience, arbitration was usually just as expensive and involved as litigation; the supposedly neutral benefits of a more efficient, less formal, and cheaper forum weren’t coming to fruition (at least in their cases). And second, for low-value wage claims, they reported that arbitration frequently turned out to be more expensive for the employer than judicial proceedings, not because arbitrators were awarding more damages that a court would — the statistics indicate that employees are more likely to get higher damages in court than in arbitration — but because the employer was covering the sometimes hefty arbitration fees.

Hearing from these lawyers on the front lines was a great reminder that there’s still a lot of work to do just to enforce the meager protections that we do have against coercive arbitration. Arbitration isn’t always the silver bullet its proponents claim it is, even for employers.