Quirky Question #253, Private arbitrations becoming not-so-private?

Question:

I read with interest the answer to Quirky Question #248 about mandatory arbitration. You mentioned one of the benefits of arbitration being that is more private than a dispute in court, which is certainly a consideration for our company as we determine whether to implement this type of policy. Is that really the case, given the recent legislation I’ve heard about in California requiring arbitration companies to make public everything they do?

Answer:  By Joel O’Malley and Jessica Shiffman

Joe O'Malley

Joe O’Malley

Jessica Shiffman

Jessica Shiffman

You’re right to be considering the private nature of arbitration as one of the factors in whether to implement mandatory arbitration of employment disputes. And as your question mentions, California – consistent with its general hostility to arbitration – did recently enact legislation attempting to strip some of the privacy benefits of arbitration. The law broadens what arbitration companies must disclose to the public about otherwise private arbitration, but it’s certainly not everything about the arbitrations. It remains unclear how broadly the scope of that new law will be applied.

Before the recent law’s enactment (AB 802), California already had a statute in place requiring private arbitration companies like JAMS and AAA to disclose certain information and make it available on their websites. That information included, among other things:

  • The name of the employer
  • Type of dispute (e.g., insurance, health care, employment, etc.)
  • How many times the employer had previously been a part in an arbitration generally
  • Whether the employee (or other party) was represented by legal counsel
  • The type of disposition, amount of the claim, amount of award, and any other relief granted
  • The arbitrator’s name and fees

 

Now, under the new law, arbitration companies must additionally disclose:

  • Whether the arbitration was demanded pursuant to a pre-dispute contractual clause (presumably to show which employers are using mandatory arbitration policies)
  • Whether the employer or the employee was the initiating party for the arbitration (presumably to show the public which employers are repeatedly forcing their employees into arbitration)
  • Whether the employer or employee prevailed (presumably to show how awful arbitration supposedly is for employees)
  • The total times the employer previously was a party in an arbitration or a mediation administered by the private arbitration company (presumably to show how frequently the employer would otherwise be getting sued)
  • The name and firm of the attorney who represented the employee (presumably to show other would-be plaintiffs who they can contact for representation)
  • Whether the arbitration was in person, by telephone, by video conference, or solely by document submission (presumably to show how difficult arbitration can be)

 

With enactment of AB 802, plaintiffs’ counsel will have easy access to information telling them which employers will try to force claimants into arbitration, and which employers have a history of paying out awards. What remains unclear about the statute, however, is how broadly it will apply to employers outside of California. The law is found in California’s Code of Civil Procedure, so arguably it applies only to arbitrations that occur in California, or possibly to arbitrations where one of the parties resides in California. Despite the new disclosure requirements, arbitration still has virtually all of the benefits – and drawbacks – described in this blog’s previous answer. We would not let this new law change what your company was otherwise thinking with respect to implementing a mandatory arbitration policy.

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