Arbitration has been around forever for labor disputes. Unions and their employers have long relied on arbitration as a relatively inexpensive way to resolve disputes. In the labor context, the arbitration process is set up through a collective bargaining agreement. The arbitrator is picked by both sides from a list of some 10 ore more names. The unions and employers know more or less who the arbitrators are and how they will approach various issues. The unions and the employer share the fees for the arbitration. Arbitrators receive anywhere from $150 to $500 per day. Fees for renting a room, travel, etc. can add up to another $500 per day. Since the fees are shared, the incentive is for arbitrators to not favor either side. This approach has some fairness to it. The entire process is negotiated.
By going to arbitration, unions give up jury trials, but instead, they get a quicker system to resolve workplace issues.
But, in the past 10 years or so have these arbitration style processes have invaded the non-union context. Employers have seen them as relatively inexpensive and just as fair. But, that is simply not true. Unlike labor unions, your average employee involved in non-union arbitrations will participate in an arbitration only once in his/her life. The employee knows nothing about any of the possible arbitrators on the list. The employee cannot afford $500 per day for an arbitrator. The courts have imposed some limitations, but still, the employee is expected to pay some fees in most non-union arbitrations.
Its a tough deal for employees. So, why have arbitrations? Well, mostly because the employer want them, or think they want them. There have been one or two instances of arbitrators awarding sizeable awards to employees. But, most employees cannot even afford to get into the door of an arbitration.
But, at least one defense lawyer finds arbitrations to be not worth the trouble for employers. In his informal survey, he finds many defense lawyers who agree with him. The process has grown, in part due to many lawyers and employees pushing to get some of the same protections they would have in court.
But, across a range of consumer disputes, arbitrations appear to be here to stay.