“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:

Agreement about Arbitration and its Rules

1. Agreement to Arbitrate: The two parties signing below (“Parties”) agree to resolve every claim and/or dispute between them by submission to binding arbitration using this set of rules, timetables and procedures, and such other rules, timetables and procedures of the dispute resolution company (defined below) that are not inconsistent with these.

2. Company; Location; Law; Administrative Fee: (a) The arbitration will be initiated and conducted under the auspices of any independent dispute resolution company (“DRC”) without conflicting interests, provided that the DRC (b) is not the American Arbitration Association, and (c) first agrees in writing that it and its arbitrator will honor and abide by this set of agreed arbitration rules, timetables and procedures. (d) The arbitration will be conducted in the city or town where the employee did most of his or her work, and (e) under the laws of that state, without regard to the laws of any other state.

3. The Single Arbitrator: One retired judge will be used to arbitrate the dispute(s), to be paid according to his or her usual hourly or daily fee schedule, chosen randomly by the DRC from its list of available arbitrators, who must first agree in writing to honor and abide by these rules, timetables and procedures.

4. Claim: The party initiating the arbitration (“Claimant”) must file three (3) copies of its claim  (“Claim”) against the other party (“Respondent”) with the DRC, and simultaneously serve the Respondent with a copy, which must include (a) a completed DRC form used for this purpose, (b) all appropriate identifying and locating information about the “Respondent,”  (c) its version of the facts of the dispute(s), (d) a summary of what it believes is the applicable law, (e) the damages alleged, and (f) the relief sought. Filing and serving must be made by Federal Express or UPS overnight delivery (“Required Notice.”)

5. Answer: The Respondent must (a) file three (3) copies its Answer with the DRC, and (b) serve one copy of the Answer upon the Claimant, both by Required Notice, within ten (10) calendar days after its receipt of the Claim.

6. Counterclaim(s), If Any: If the Respondent chooses to file and serve Counterclaim(s) against the Claimant, it must do so at the same time it files and serves its Answer, with three (3) copies to the DRC and one to the Claimant, who will then have ten (10) calendar days in which to file and serve its Answer to Counterclaim with the DRC and Respondent by Required Notice.

7. Administrative Pre-Hearing Telephone Conference: Within no more than seven (7) days after pleadings are served, a pre-hearing telephonic conference will take place during which the arbitrator and the Parties’ counsel will discuss any open issues and administrative matters.

8. Discovery: There will be no depositions. If either party desires any production of documents prior to the Hearing, a reasonably, concise description of those documents must be included in a separate section of the Claim or Answer (or Counterclaim and Answer to Counterclaim.) The party requested to provide documents will do so, to its best ability, within seven (7) calendar days after receipt of the Claim or Answer (or Counterclaim or Answer to Counterclaim.) The arbitrator will consider any (a) deviation from these timetables, or (b) declining to provide documents appearing unreasonable, to be an admission by the party deviating from the schedule or declining to produce documents against the interests of the party in violation, and that those documents would show facts supportive of the requesting party. Claimant and Respondent agree that these procedures are fair and reasonable, entered into voluntarily, and fulfill fundamental due process.

9. The Hearing: The Hearing will take place within twenty (20) calendar days of the service and filing of the Answer (or Answer to Counterclaim, if any). Each party will have four (4) hours to present its case, including its documents, witnesses and final summary argument(s), if any. Formal rules of evidence will not be required; motions of any kind will be highly discouraged.

10. The Award: The arbitrator will render his or her award within seven (7) calendar days of the Hearing, in writing, to be delivered by email to both parties’ counsel, without reasoned explanation. The award may allocate the arbitrator’s fees, but will not allocate attorneys’ fees; each party will be responsible for its own legal costs. Each party will be responsible for one half of the DRC’s administrative fees. The award may be submitted for judicial confirmation to any court in the city in which the Hearing took place.

This is the way to “take back the arbitration process” by using (a) the power of competition for business, (b) mutual fairness, and (c) the simple clarity. Let’s all not fear to raise concerns or issues, and let’s all get back to a reasonable way of resolving disputes.

These “Sklover’s Arbitration Rules” are based in the fundamental notion that resolution of disputes in an informal, cost-efficient and prompt manner is in the interests of all – other than the arbitrators’ and arbitration companies’ – so that we can all get back to the business of business. Do your best to insist on using these rules, timetables and procedures to your best interests.

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation of work and career issues requires that you think “out of the box,” and avoid risks at every point in your career. Knowing ways to resolve disputes when they arise is a distinct advantage in navigating workplace life. Learning the “in’s and out’s” of reducing employment risk are available on our blogsite. Now it’s up to you.

Always be proactive.  Always be creative.  Always be persistent.  Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

© 2010, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.