In its purest form, every selection of an arbitrator is all about the strategic circumstances of the parties. Each side, regardless of the arbitration dispute type (whether commercial, construction, labor, employment, etc.) finds itself considering how it wants to perceive the case tactically. At the outset at least, both expect to win and yet, the side that does not prevail still embraces the appropriate expectation of doing so with grace and honor. Thus, arbitrator selection should be of primary concern, even to achieve the minimally expected value of the outcome.
Wisdom of the neutral aside, clearly not all employment arbitrators are alike. Exactly how arbitrators manage the process, decide cases, and bill for their time varies significantly. Their background and training should influence your decision making.
The sort of dispute they will be responsible for may dictate the level of training required of them and whether a more general or specific type of background is needed. The parties adopt employment arbitration since, unlike a court proceeding, they have the benefit of being able to select their decision maker. Similar to litigation in the courts, there may be certain and protracted pre-hearing, intra-hearing and post-hearing proceedings. These will likely include formal motions, objections, rulings and interim orders, including perhaps, fact-finding.
Thus, the expectation of such procedural matters may dictate the selection. Your needs for a complex case, (i.e., perhaps with ERISA or other pension-related issues) may require the arbitrator to have a more rigorous, exacting or specialized background, as opposed to a general legal knowledge of contracts, albeit tied to one specific area of the law. This may also require some additional formal training.
Contracts and Clauses
Initial determinations are dictated by the general needs and requirements of your case. A starting point should be the employment arbitration contract. While contracts may vary on the method of arbitrator selection, the parties may not have had sufficient prior knowledge and/or opportunity of forethought to plan for this adequately. Regardless, your contract may contain very specific arbitrator background requirements and steps on how the selection process will be completed.
Certain legal requirements may come into play here. Of significance to this discussion, but certainly not considered to be the complete range, are two types of employment contracts. In this arena are employer-promulgated plans and individually negotiated contracts.
Employer-promulgated plans are alternative dispute resolution plans/contracts designed for company-wide use by most employees. There are exceptions, notably senior executives who negotiate some or all of their employment terms. The plans vary and are tailored specifically for employer and/or employee needs, depending on the status of each.
Regardless of which is adopted, plans with pre-dispute clauses should allow for the employee to participate in the arbitrator selection process. This factor standing alone is an important “due process” right that all plans should contain. Discussed in more detail below, the due process concept should be important, for both sides, not only to maintain individual employee rights, but legally, to promote survivability of the plan.
Some arbitration clauses may call for a panel of three arbitrators rather than a sole decision maker. Sometimes, there are valid organizational-based or internal “political” considerations for this. Otherwise, many authorities believe that in most cases, unless there are cogent reasons relating to the need for the alternative skill sets of a three-person panel, a single arbitrator is typically the better option. It is equally important to point out that the parties can, by fiat or otherwise, mutually agree to override a contract provision calling for a panel.
Supporting this view is data research showing the rationale. The American Arbitration Association (AAA) recently compared commercial arbitration cases with three arbitrators to those with a single arbitrator (approximately 100 cases). To no one’s surprise, the single arbitrator cases, on average, concluded six months earlier in comparison to cases with a panel of three arbitrators.
Type and Nature of Case
The type of case and its facts should also be considered when selecting an arbitrator. Will you need an arbitrator who has a specific industry background necessary to understand the facts of your case, or is the grievance more universal, relatable to any industry or business type (i.e., a generalist)?
Will there be issues presented (i.e., motions made, discovery related or otherwise) better suited for an attorney arbitrator or a former judge? The law with respect to employment arbitration is clearly fluid and ever changing. Thus, there is a strong argument that an attorney arbitrator well versed in the recent changes in the law should be selected. Since 2010 there have been significant decisions by both the U.S. Supreme Court and National Labor Relations Board (NLRB), which have and, in the future, will continue to strongly impact employment arbitration.
Many of these decisions involve class and collective actions and focus on whether the Federal Arbitration Act preempts state laws barring certain types of arbitration. Since 2010 we have seen the Stolt-Nielsen v. Animal Feeds case, 130 S. Ct. 1758 (2010), where the court addressed class and collective actions when arbitration agreements are silent.
This was followed by AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), a case which held that class action waivers in arbitration agreements are permissible. The Stolt-Nielsen and Concepcion decisions were generally thought to extend to employment arbitration agreements.
Therefore, it was a surprise to many when the NLRB appeared to disregard the court’s ruling in Concepcion and held in D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012), that it is an unfair labor practice for employers to mandate pre-dispute arbitration agreements barring employees from bringing class or collective action claims in court or arbitration. The complexities raised by such cases involving cross-pollination into the arena of National Labor Relations Act policy create even stronger concern for the appropriate selection of an employment arbitrator.
Notwithstanding the above and if your case is less complex, the legal background may not be essential. Would a non-attorney arbitrator look at the case differently and bring a different approach to the process? Perhaps distinctly contrary, would the presence of another professional type of arbitrator (i.e., an architect, business broker, pension expert, etc.) relate better to the type of employment dispute at hand? Many employment cases do involve financial issues, stock options and benefits. Would someone with a financial, pension or accounting background be better suited for addressing these types of financial disputes?
The arbitrator’s per diem, cancellation fees, travel expenses, and study time rates vary significantly. The daily rate or per diems range from $1,000 to $ 4,000, a significant cost difference from the lowest to highest rate. Thus, arbitrator per diem fees should be carefully considered when selecting an arbitrator. If there is a potential that your case will settle, but only if the parties are faced with the pressure of a scheduled hearing date, arbitrator cancellation fees and policies must also be taken into consideration.
Perspectives on Experience
After determining the type of arbitrator required for a particular matter, you can then begin researching those available or listed as potential options for your case. First, a careful review of the arbitrator’s resume should be completed. Most arbitrators provide detailed resumes including education, industry experience, and all fees associated with their service.
Second, if possible, speak with colleagues that have gone before this arbitrator in the past. Information via word of mouth can be crucial. Third, review past decisions by the arbitrator. LexisNexis and Westlaw contain thousands of full decisions redacted from employment arbitrators nationwide. Thoughtful review of such decisions will provide a sense of how a given arbitrator will manage your case, and provide insight on their analysis of various issues.
Every proficient arbitrator will likely concur in the saying, “there is no substitute like experience” and yet, the misconceptions abound! For one thing, there is a strong argument for selecting and utilizing a new arbitrator, particularly when it comes to less complicated disputes and, more particularly, when the experience they bring to the table is significant. These “new” arbitrators are generally not new to the employment law community.
Most so-called “new” employment arbitrators have 20 to 30 years of experience in the field as advocates and have been carefully screened in order to serve as a neutral. The “new” arbitrator will have gone through a rigorous interview and review process and be properly vetted. The AAA requires that 50 percent of the new applicant’s current or past legal practice be in the area of employment law.
It is important for the arbitration process, in general, that we develop the next generation of employment arbitrators. Never forget that the seasoned arbitrator that you prefer to use regularly was once also a new arbitrator. Also, that he or she will not be around forever.
Look to the future.
Jay D. Goldstein serves on the American Arbitration Association, New York City Employment Panel, and is a member of the National Academy of Arbitrators. Jeffrey T. Zaino is vice president of the Labor, Employment and Elections Division of AAA.