At least since 1925, when the Federal Arbitration Act (FAA) was enacted, arbitration has been considered a favored method of dispute resolution. Consistent with this view, many employers have developed alternative dispute resolution programs for their workforces that include pre-dispute arbitration agreements. Many of these agreements contain class action waivers that require claims to be arbitrated individually and not on a class basis. While employers should continue to consider the salient advantages of using such arbitration agreements, a number of recent developments suggest that a more fulsome evaluation is warranted. This article tracks some of the more significant developments and summarizes the “pros and cons” employers should consider regarding their dispute resolution programs.

The Advantages of Arbitration

Resolving disputes in arbitration offers many advantages over litigating in court for both employers and employees. Among the most significant of these is confidentiality. Because arbitrations are typically private, the parties are able to resolve employment claims outside of the public eye, which may be particularly desirable in cases involving sensitive matters. In addition, arbitration can often be more streamlined and less cumbersome than court litigation, with concomitant cost savings. Often, arbitration pre-hearing procedures, including discovery and motion practice, are circumscribed and less formal than in court. Moreover, the parties typically jointly choose the arbitrator(s) or at least have significant input into who is appointed. And, because the rules of evidence are not strictly applied in arbitration, hearings may proceed more flexibly and efficiently. Arbitration can also avoid the sometimes unpredictable decisions of a jury, and predictability of outcome often facilitates early settlement discussions. Arbitration also promises finality given the limited ability to challenge arbitration awards in court.