10 Compelling Reasons for Employment Arbitration: Tackling Litigation Imbalance

This third installment of the 10 Compelling Reasons for Employment Arbitration explores the impact of an arbitration agreement on a plaintiff’s litigation strategy. As discussed herein, arbitration programs can tamp down a plaintiff’s ability to exploit certain litigation inequities that threaten increased risk for employers.

The Third Compelling Reason: Tackling Litigation Imbalance 

The mechanics of typical court litigation of employment disputes give plaintiffs a thumb on the scale, if not an insurmountable advantage, in obtaining a favorable resolution of their claims. The judicial system is designed to give an aggrieved party, in this case, an employee or former employee, their “day in court.” However, the rules of court and controlling case law in virtually every jurisdiction make it effectively impossible to defeat meritless claims without the employer incurring significant upfront costs. For example, consider claims brought under the Conscientious Employee Protection Act (“CEPA”)—the New Jersey employee “Whistleblower” law (N.J. Stat. § 34:19-1, et seq.). CEPA is designed to prevent employers from retaliating against employees if the employee threatens to complain, or complained, about a violation of the law or regulation by the employer.

Conceptually the importance of this protection is undeniable; if employees fear retaliation for calling out actual misconduct, unlawful practices would continue unabated. However, the legal standard for maintaining a viable claim under New Jersey’s CEPA law creates a litigation framework that makes it nearly impossible for an employer to defend against such allegations without incurring significant discovery costs—regardless of the merits of the claims. Specifically, under CEPA (and other state’s similar laws) “whistleblowers” need only allege that they “reasonably believed” the conduct in question to be unlawful. Thus, to prevail on a pre-discovery motion to dismiss, employers must, somehow, demonstrate—based only on the employee’s own allegations in the complaint—that the employee’s belief about the legality of the conduct in question was “unreasonable.” Suffice to say that it takes highly unusual circumstances and a poorly drafted complaint to open the door to dismissal pre-discovery on the grounds that the plaintiff’s belief was “unreasonable.”

As a result, the efficacy of a motion to dismiss, a legitimate litigation option for defendants to defeat meritless claims early on, is virtually eliminated. Instead, employers must face the costs of full-blown discovery, including multiple depositions and extensive paper discovery, before a post-discovery motion for summary judgment becomes a possibility. Employers are thus often left with a business decision about a case that may be completely without merit: should money be spent on: (1) engaging in the discovery process (with all of its costs and business disruption) to attempt to expose the frivolity of the claim—with no guaranty of success; or (2) paying out a settlement on claims (hopefully in an amount less than discovery and motion costs) that do not warrant such compensation, for certainty of resolution.

An arbitration program can level the playing field and incentivize earlier, equitable resolution of claims by eliminating: (1) excessive discovery; (2) multi-plaintiff, class, and collective actions; (3) juries; and (4) appeals. The next installment of this series will explore appropriate limitation on discovery and following installments will discuss each of these other litigation-management features of arbitration.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.