September 2000 — Some insurance companies and courts are requiring binding arbitration over accident injuries, and some employers are requiring the same binding arbitration of all non-union issues concerning job complaints. AFL-CIO President John J. Sweeney calls them a “farce” and unfair to workers without union representation. Numerous commentators have complained that one of the earliest of these, the securities arbitration covering violations by stockbrokers, place consumers at a big disadvantage.

An example was the loss of $500,000 for an investor who directed conservative stock investment, but his broker placed it all in volatile options. The arbitrators awarded $100 to the investor, and the securities industry called this an investor “win”. Would anybody doubt that the “losing” securities company will be glad to hire these arbitrators again?

The major problem is the concern that the arbitrators will not be fair to individuals or employees who will never hire them again. As Jane Bryant Quinn stated in her Your Money column, the panels are often perceived as tilting toward industry?in part because the industry largely picks who is on them.

AFL-CIO President Sweeney confirms there is a serious problem with the lack of a level playing field for workers where a union is not involved as a party to balance the employer’s power. To counter this power, legal representation that is national in scope is necessary. Often employers make a prospective employee agree on the hiring application that any dispute the employee may have with the company must be taken to arbitration. It may also be in the employee manual which the worker has to sign for, or it can be a separate agreement the worker is asked to sign if they want the job.

If there is no union at the company, then any job complaint a worker has, such as wrongful termination or job discrimination, would have to go through this arbitration rather than through the court system with its jury protections. Even with a union at the company, issues not covered in the union contract, such as job discrimination, fall under the mandatory arbitration clause if it exists.

Binding arbitration usually consists of a panel of one to three members who hear the case without being required to follow any rules of evidence, or even any particular rules of law. Often the individual has to pay a half share of the large fees for these “arbitrators” in advance or the right to pursue the case is lost. Usually the only appeal right is for blatant misconduct or prejudice that has to be proved by the complainant.

There is no right to a jury of one’s peers, nor review by judges who are chosen for their ability to judge fairly and must follow the specific rules of law involved or be reversed by appeal courts. The arbitrators do not have to be lawyers or even knowledgeable in the field that is in question. On some occasions arbitration is called “non-binding”, but normally such a process is called mediation. The latter is a far better process since it just provides a forum for settlement discussions, and if the process fails then the case moves on to a fair adjudication stage.