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Arbitration Agreements Absorb Another Judicial Jab

Arbitration Agreements Absorb Another Judicial Jab

Posted by Frank Steinberg | Jul 14, 2009 | 0 Comments

As we've noted before, mandatory arbitration provisions remain the subject of considerable controversy.  Mitch Rubenstein at the Adjunct Law Prof Blog brings us another important example, this one from the 6th Circuit. 

Mazera v. Varsity Ford is a race discrimination case that was initially filed in court.  The defendant employer moved to compel arbitration on the basis of a handbook provision.  The trial and appellate courts had no trouble finding that there was a binding agreement to arbitrate.  The problems arose over the agreement's provision that the employee had to pay $500 of the arbitration costs within 10 days. 

The 6th Circuit refused to draw a bright-line rule about the enforceability of the cost sharing provision.  Recognizing that such a provision could deter some employees from filing arbitration appeals of employment decisions, the court engaged in a detailed analysis of the particular plaintiff's ability to pay.  In this case, they concluded, the cost was a deterrent..

The accepted rationale in support of arbitration (with which we do not necessarily agree) is that it is a quicker and less costly alternative to litigation.  It seems to run counter to that rationale to require such a detailed analysis to determine whether a $500 cost is reasonable.  Surely the parties spent far more than that litigating the question, to say nothing of the cost of judicial time through two levels of federal courts. Wouldn't it be easier, and still consonant with the purpose of arbitration, to require the employer, as the party that insisted on the arbitration forum, to bear the cost of the arbitrator?  To a newly unemployed employee $500 was a lot of money.  To the employer, $500 is a pittance which was probably recouped the first week that it did not have to pay the employee's salary.

About the Author

Frank Steinberg

Frank is the founder and principal of Steinberg Law, LLC. A Jersey boy born and bred, he focuses on employment litigation and counseling, business litigation,  and aviation law. Following law school and a clerkship in the federal district court Frank spent his early career with large litigation ...

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