Mandatory Mediation Instead of Arbitration?
This article began as an attempt to crystallize the plethora of recent rulings on the validity of mandatory arbitration agreements in California. However, after hours of trying to explain how arbitration agreements have been invalidated or, conversely, upheld by California and federal courts, I gave up. There are so many court decisions and so much legislation, and much of it contradicts itself, perhaps aptly suggesting our love-hate relationship with the idea of arbitrating instead of litigating conflict.
The Limits of Litigation
While many of us agree we live in far too litigious a society, California’s plaintiff-favoring landscape seems oblivious to that idea. The rationale behind that is, possibly, that any plaintiff denied her due process is one plaintiff too many, despite the fact that the legislation that remedies this also necessarily ushers in countless non-meritorious matters. As someone who used to do plaintiff litigation, I quickly became disillusioned by the many meritless cases that were floating around that seemed to mostly benefit the lawyers who brought them, and where defendants often settled despite lack of merit, given the sheer cost and energy of litigation—a cost that plaintiffs generally don’t bear.
What I increasingly see as a mediator is that both parties walk away unsatisfied. The plaintiff because they do not feel vindicated nor that they receive emotional closure. The defendants, conversely, often feel that the case is a “shakedown,” given that the employee in question was often difficult or struggled to perform. As a mediator, it can sometimes be demoralizing to see that neither side seems able to own their mistakes or to do the hard work of processing their failures—failures that could be alchemized into great success stories in the future if properly acknowledged and considered.
But arbitration does not seem to be the golden ticket to this problem. This is especially true given that the landscape shifts so quickly and frequently about what is and is not allowed to be arbitrated. As an example, in an effort to bar mandatory employment arbitration agreements, California passed AB 51 in 2019, which prohibited employers from requiring employees to waive their right to sue in court. But the Ninth Circuit struck down the law in 2023, ruling it was preempted by the Federal Arbitration Act (FAA). The United States Supreme Court has similarly upheld the supremacy of the FAA when states have attempted to severely limit its use.
How Mediation Can Help
So, what is an employer to do? The answer is that it depends. Sometimes requiring arbitration can be a good path, and counterbalances an over-active plaintiff lawyer who files a lawsuit on pretty much anything, regardless of merit. In addition, sometimes it can be so costly for an employer to pay for arbitration that arbitrating a low-value case does not make sense. When adding the uncertainty of certain claims being exempted from arbitration, or new court cases determining that arbitration is no longer valid in key areas, it can be more trouble than it is worth.
The answer, it seems to me, is to require both parties to first mediate their conflict, at the employer’s expense, before any filing occurs. Again, this not a golden ticket, but perhaps offers the best of both worlds. Mediation is not binding, and so not subject to the same regulation and controversy as arbitration. Yet, mediation still allows for a non-party to the matter to weigh in on how the case might fare in trial, when a reality check is needed.
More importantly, mediation when done well, educates the parties on how others might see their conflict and allows them to move beyond their own limiting narratives. While admittedly some parties may balk at settling so early, mediation can still jostle the parties out of their own entrenched position before they both invest so much time and money in trial preparation that only large settlements will make a case go away, meritorious matter or not. This sets the parties up to settle early, and to be nimble in terms of moving in and out of settlement discussions once the stage has been set. In addition, ideally the mediator will continue to track the parties and check in with them as the case continues, reminding them that the alternative to a negotiated agreement is dissatisfaction on all sides. When seen in this light, parties may quickly change their mind about litigating a matter and instead opt for a more empowered end to their conflict.
Author: Diana Maier, Partner. Diana is a Spanish-speaking mediator and workplace investigator, as well as a seasoned employment lawyer. Diana’s specialty is resolving employment and business dispute litigation, as well as interpersonal conflict in the workplace.