In “Start-Ups Embrace Arbitration to Settle Workplace Disputes” (May, 14, 2016), the NYT discusses the use of arbitration in solving workplace disputes by what the Times describes as “once-plucky start-ups”.

Summary

The article focuses on WeWork, a start up that rents office space.  WeWork’s dispute resolution program is described as including three steps:  an initial step involving the individual employee and his/her manager; a second step involving mediation; and a final step involving binding arbitration.

The article notes that arbitration clauses are normally associated with “the playbook of big corporations,” an approach that might seem at odds with the more pro-employee and progressive attitudes of many start-ups.  However, under competitive pressures to reduce costs, some start-ups like WeWork have turned to arbitration clauses as a piece of that effort.

Commentary

The article is interesting in at least three respects.

First, the article refers to “arbitration of workplace disputes” as opposed to “employment” or “labor” arbitration.  It is not entirely clear why the reporters used this particular term.  It might be possible that the article was trying to capture the distinction between traditional employees and contract workers. The choice of terms is interesting given that the distinction between employment and labor arbitration has been an area of confusion in the media.  Employment arbitration refers to the resolution of workplace legal disputes by a person other than a judge or jury in court.  In essence, employment arbitration is a substitute for civil litigation. Labor arbitration refers to arbitration processes covering unionized employees under a collective bargaining agreement. Whether using the term “arbitration” in this broader context will help to clarify or obscure the distinction between the different types of arbitration is left to be seen.  But it is interesting to note the change in terminology.

Second, the article notes that unlike other companies that seem intended to bury arbitration clauses in their employment contracts, WeWork heralds the arbitration policy as part of its overall dispute resolution program.  It will be intriguing to see the effect of such publicity in the attitude of employees towards these clauses.

Finally, the article raises some of the issues and questions that have been debated for years about mandatory employment arbitration and the fairness of that process, such as the contract-of-adhesion nature of such provisions, the secretive nature of arbitration, and the fact that it is “often lopsided in favor” of employers.   These are, of course, concerns that are specific to some employment and consumer arbitration clauses.

More importantly, the article raises fundamental issues about whether arbitration of employment disputes should be mandatory and whether it can be fair. The National Academy of Arbitration has long favored voluntary arbitration but also has a detailed record off seeking to assure that mandatory arbitration be fair.  For a short description of that history see: A Short History: The NAA and Fairness in Mandatory Employment Arbitration.