The AAA® is a not-for-profit organization whose mission is to settle disputes as quickly as possible at the least expense. Many employment contracts specify arbitration to resolve any disputes that arise between employee and employer.
Arbitration is the out-of-court resolution of a dispute between parties to a contract (in this case, the employee and employer) decided by an impartial third party (the arbitrator).
Both arbitration and litigation (going to court) will end with a decision. However, they differ in many respects, notably that
- Arbitration is faster and more cost effective than litigating in court.
- The parties select the decision maker, who will be a person with expertise in the employment area. Litigating parties do not select their judge, who likely will not be an expert in the employment field.
- 77% of cases settle
- 9% of cases go to award
- 14% other
AAA employment arbitration cases initiated by the employee settle 77% of the time.
Because of this, the employee:
- Does not have to spend the time or the money going through the entire arbitration process.
- Can move on relatively quickly.
- Benefits monetarily without incurring lengthy attorney’s fees and a potentially emotional procedure.
- Does not have to tell their story in front of a jury, and details about the case will not show up online—which can be helpful in background checks for subsequent employment. Cases litigated in court become part of public record.
Only 9% of AAA employment arbitration cases go to a final award and of those cases 26% result in an award in favor of the employee.
- Total Cases that went to Award: 829
- # of Monetary Awards for the Employee: 213 (26%)
- Median Monetary Award for Employee: $69,824
- Average Monetary Award for Employee: $290,635
The smaller percentage of cases that go forward usually includes cases that companies believe they can win with their attorneys, financial advantage, and experience in the issues. In court, these same resources would be used against the employee in the much more adversarial, formal, and lengthy process of litigation.
While employees who proceed with the entire arbitration can win large payments, the cost of attorneys’ fees as well as time and effort must be factored in. Proceeding with arbitration, however, is likely to be quicker and may result in a more favorable outcome than going to court.
Data is for individual employment filings closed and awarded from October 1, 2017 – September 30, 2022.