When a Washington–based company employs eight or more employees, the employer is subject to the requirements of the Washington Law Against Discrimination (“WLAD”) which prohibits discrimination on the basis of race, color, national origin, religion, sex, sexual orientation, age, and disability status. While offering protection to workers, the law also brings the potential for high risk lawsuits and frequent extortion by Plaintiff’s counsel to employers. However there is a defense to mitigate such risk – the Federal Arbitration Act (“FAA”).
The FAA provides compulsory and binding arbitration of private disputes that are enforced through contractual means. Parties can choose to require dispute resolution of all their disputes in a typically cheaper and quicker arbitral forum, instead of the more costly and extended court system. In arbitration, a chosen arbitrator – typically an attorney or a former judge who specializes in the subject matter – serves as judge and jury for the truncated process, which usually lasts a few months, not years like traditional court litigation. Because the process is truncated and the time-frame significantly shortened, companies realize substantial savings. Typical savings can be 1/3 to 1/4 the costs of litigation if designed correctly.
In addition to being cheaper and quicker, arbitration typically results in lower payouts from an award and settlement perspective. Employers in arbitration typically escape an emotionally charged jury in the assessment of damages because an arbitrator tends to render a more dispassionate decision that is tied to rational and predictable factors. A case that is slated for arbitration does not have as high settlement value because both plaintiff and defense counsel understand the impact of the arbitrator resulting in a lower damage range.
Sophisticated employers have steadily taken advantage of arbitration since the Ninth Circuit decided EEOC v. Luce Forward in 2003. Prior to Luce Forward, it was unclear whether employers could require employees to sign arbitration agreements as part of their employment. But now, there is no excuse. Every employer can and should require final and binding arbitration of employment disputes. Arbitration agreements routinely enforced, can be used to limit discovery, over-litigation and other abuses, and can be used to significantly reduce employer exposure and risk of payout.