By: Dan Cohen – 4/22/14
With the adoption of the Michigan Revised Uniform Arbitration Act in 2013 (“RUUA”), Michigan employers once again must ask themselves whether they are better off arbitrating employee claims than litigating them. The RUAA is a modernized version of Michigan’s 50 year old arbitration statute. For example, it recognizes and authorizes e-records, provides for fundamental fairness by restricting waivers and modifications of certain provisions, allows arbitrators to grant interim relief (i.e. injunctions) to preserve the status quo, allocates who determines procedural and substantive arbitrability, and authorizes pre-hearing discovery.
But does the RUAA now make the case for using arbitration as an alternative to litigation? In my humble opinion, I think not: for several reasons. First, by authorizing discovery, complex arbitrations will likely become increasingly expensive. Although it is not likely to become as expensive as most litigated matters, the days of low-cost arbitrations are probably behind us. Moreover, because discovery can be quite time-consuming, it is probably inaccurate to describe arbitration as a quick, inexpensive option to litigation. Second, arbitrators have a vested interest in allowing disputes to proceed to a hearing. Indeed, they make less money if they grant summary dismissal of the case. Judges, on the other hand, do not make money off your case and must manage their dockets. Thus, plaintiffs know that in arbitration almost every case goes to trial, and settlement opportunities tend to be few and far between.
Next, arbitrators often like to come up with compromises so that both sides might become repeat customers. For example, an arbitrator might reinstate a plaintiff but without back pay. Of course, this often creates an untenable situation and exposes the employer to a retaliation claim. Finally, there is virtually no opportunity to appeal an adverse arbitration award even if the arbitrator fails to follow on point authority or makes an obvious mistake during the hearing. So, by and large, you are stuck with an unfavorable decision in arbitration.
The primary advantage of arbitration remains the avoidance of trial by jury and the prospect of a runaway jury verdict. If you have been through a jury trial, you understand then that as the employer, you simply do not want to be there. Juries have preconceived notions of fairness that often interfere with the application of the law to the facts. This might be reason enough to seek out measures that avoid jury trials. Arbitration is one such method. However, as I have indicated, arbitration has its own drawbacks. A lesser known option is a “waiver of trial by jury” in favor of a bench trial before a judge. In Michigan, jury waivers entered into voluntarily are enforceable. They can be very effective because you can still obtain summary dismissal before trial since the judge, unlike the arbitrator, has no skin in the game. And, for those judges who would otherwise be inclined to send a close case to the jury, they in essence would be sending the case to themselves. Of course, you retain the full right to appeal the judge’s decision and you avoid inflated jury verdicts. You’ve now got your cake and you can actually eat it.