CALIFORNIA’S NEW DISCLOSURE REQUIREMENTS DO NOT TRUMP ARBITRATION BENEFITS

Arbitration, like mediation, has always been an attractive alternative to prolonged litigation for numerous reasons, including in the past the confidentiality of the proceedings and the outcomes. For employers in particular, arbitration remains an effective mechanism to keep employment disputes outside of the hands of a jury, which tend to be made up of sympathetic employees rather than business owners or managers. Also, many jurors have had problems with a supervisor at one time or another, or know of someone who has. Under these circumstances, the deck is often stacked against employers before a trial begins. Arbitration helps even the playing field for employers.

Employers engaged in arbitration proceedings, however, need to understand that the opposing party or potential plaintiffs now have access to much more information about the companies’ arbitration history than ever before thanks to a new California law that went into effect on January 1, 2015. For instance, an opposing attorney or potential plaintiffs can now easily verify the number of arbitrations an employer has had before a particular arbitration company, the nature of each underlying dispute and the outcome of the arbitration, including the amount of the claim, award and attorney’s fees.

In addition to requiring full compliance with the new law, private arbitrators like those most used (AAA, Judicate West and JAMS) must make the required information available in a user-friendly, sortable database available on the arbitrator’s website. The information these private arbitrators must now disclose in these databases includes:

  • The name of the employer defendant involved in the arbitration, and the total number of arbitrations and mediations the company has had before the particular arbitration company;
  • Whether arbitration was demanded pursuant to a pre-dispute arbitration clause and, if so, whether the pre-dispute arbitration clause designated the administering private arbitration company;
  • The nature of the dispute involved, including employment. If the dispute involved employment, the arbitrator must disclose the employee’s annual wage within a certain range, or if the employee refused to provide such information;
  • Who was the prevailing party in the arbitration, which includes net monetary recovery and equitable relief;
  • The amount of the claim, the amount of monetary relief and attorney’s fees awarded, as well as any equitable relief requested or awarded;
  • Whether the case was resolved by a withdrawal, abandonment, settlement, award after hearing, award without hearing, default or dismissal without hearing. If a case was administered in a hearing, the arbitrator must indicate whether the hearing was conducted in person, by telephone or video conference, or by documents only;
  • The name of the attorney and law firm representing the employee; and
  • The name of the arbitrator, his or her total fee, and the percentage of the arbitrator’s fee allocated to each party.

It is no surprise that plaintiffs’ attorneys are celebrating the enactment of AB 802, given the amount of information they can access and review before filing an action against a particular employer. These disclosures enable plaintiffs’ attorneys to better evaluate the economic value of potential cases against certain employers by reviewing previous monetary and attorney’s fees awarded against that employer. Plaintiffs’ attorneys will now be able to identify employers that tend to settle more than others in an arbitration, which may encourage more claims to be filed against that employer. AB 802 also helps plaintiffs’ attorneys to prepare for the arbitration process by providing information on other plaintiffs’ counsel who have previously arbitrated against the same employer and who can provide insight into the employer and the arbitrator. With the enactment of AB 802, plaintiffs’ counsel has more information available to raise challenges to the appointment of a particular arbitrator. All of these disclosure requirements were clearly intended to benefit plaintiffs involved in arbitration, while making it more difficult for an employer to maintain the expectation of confidentiality regarding private matters related to its past legal matters and settlements.

Although AB 802 expands the scope of disclosures related to arbitration, employers should not be dissuaded from continuing to consider arbitration as a preferred means of resolving employment disputes. Many employment disputes involve confidential, proprietary information that will continue to remain private despite AB 802. Moreover, arbitration provides a more streamline, more cost-efficient alternative to lengthy civil litigation. Accordingly, employers should ensure they have compliant arbitration and confidentiality agreements in place to protect themselves and their business. In light of AB 802, however, employers involved in arbitration should realize that the opposing party has likely researched previous arbitration outcomes and employers should adjust their arbitration strategies accordingly.

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