“False scales are an abomination to the Lord.
But a just weight is His delight.”
- Old Testament, Proverbs 11:1
ACTUAL CASE HISTORY*: Jasmine, 42, a senior executive at a major fragrance company had a clear written employment contract that guaranteed her – unconditionally – a minimum annual cash bonus of $120,000. When her employer was three weeks late in paying her, she submitted a polite email inquiry to HR, asking when the bonus would be paid. The response was simple, and surprising: “Because business was not good, the company has decided that, regardless of contractual obligations, no bonuses will be paid this year.” Soon after Jasmine found a new position with a different employer, and consulted our firm about how she could collect the $120,000 bonus due her.
Jasmine’s employment contract provided that “Any and all disputes will be resolved by binding arbitration under the auspices of the American Arbitration Association (called the ‘AAA.’)” Jasmine was happy, because she heard that arbitration was faster, easier, less formal and less expensive than the usual court-litigation process. We were not so happy, because from our experience with arbitrations in recent years, and especially with arbitrations using the American Arbitration Association, we knew that arbitration has increasingly become slower, more difficult, often more formal and always more expensive than the usual court-litigation process.
Sadly, it turned out we were right. The arbitrator appointed by the AAA considered herself an expert arbitrator, and told us so every few minutes. Her schedule was very busy – as was apparently her personal life – so it often took months to get her to answer requests. She was quite a stickler for detail: Her own “rules” required all communications to be in writing, sent a certain way, using a certain font and font size, and specified margins. Worst of all, she announced early on that, in order to review the two sides’ submitted materials, she needed to first be paid for “study time” of $50,000, half from each side. She also mentioned that the Hearing could not take place for at least 18 months, and that it would require additional fees of $20,000 from each side. That did not include her fees for the time at a Hearing, or her fees for what she called “post-Hearing” consideration of the record.
We inquired with the AAA whether anything could be done to rein in what seemed like abusive behavior of several kinds. “No,” we were told, “AAA arbitrators are free to set ground rules.” At the conclusion, Jasmine won her $120,000, but it cost her $30,000 in legal fees and $75,000 in arbitrator fees, and it took almost three years. End result: it was a bad, difficult, drawn-out, negative and very expensive experience for all concerned. Except the Arbitrator; she seemed to enjoy every minute.
LESSON TO LEARN: For many years, arbitration was seen as a less formal, more efficient, less expensive and faster way to resolve disputes. And, for many years, it was those things. Essentially, you submitted a written Statement of Claim, the other side submitted an Answer, and then you met with a person – often a retired judge – and hashed out your differences. A week or two later, the retired judge rendered his or her decision, and the parties honored it. That sure seemed good. Wow, things sure have changed over time.
Increasingly – and especially if the American Arbitration Association was used – arbitration became more difficult, much more expensive, less efficient, and slower than court litigation. Arbitrators now often seem to stretch out the case to make more money; Judges in court do the opposite: try to move cases along quickly. Now arbitrators often require more formality than Court Judges do. Now arbitrations almost always cost much more than does court litigation, and even last years – or as long as the arbitrators want them to, because the longer the arbitration, the more the parties have to pay the arbitrators. Clients are not happy, lawyers are not happy. Only arbitrators seem to like the present system.
But here is the key: If you take control of the process – and you can – you can use the old ease, informality, brevity and inexpensive nature of arbitration to enhance your interests, not the interests of the arbitrator or the arbitration company.
How do you do that? You do so by making the “arbitration rules” yourself, and insisting that the arbitrator follow them; otherwise you will take your “business” elsewhere. You can do that by insisting on inserting what we affectionately call “Sklover’s Arbitration Rules” into (a) every employment-related document and agreement you sign, and (b) if there isn’t any employment-related agreement, then suggesting to your “partner-in-dispute” that using Sklover’s Arbitration Rules when commencing an arbitration is surely in both of your interests.
The key to doing so is to control the process so that, no matter who “wins” or “loses,” at least it will not end up making both “partners-in-dispute” miserable, frustrated and poor, while making the arbitrator happy, comfortable and rich. It is not certain that your “partner in dispute” will agree to such a process, but you can only make it more probable if you can illustrate the many advantages they will enjoy. In recent years, we have found that more and more attorneys for both employees and employers find our “Sklover’s Arbitration Rules” to be fair, smart and effective in reaching a conclusion to disputes – which is in everyone’s interests. Well, not “everyone.”
WHAT YOU CAN DO: Here are what we call “Sklover’s Arbitration Rules” we recommend you request these either be inserted into every employment-related document you sign, or be used as a separate agreement to control every employment–related dispute resolution process you engage in. Of course, they can be modified as the parties may decide is more suitable to them, their circumstances, and their interests:
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