Arbitration vs. Litigation of Employment Discrimination Claims

Jun 20th, 2012
Topics: General Blog, Arbitration Agreements

Workplace discrimination claims are often governed by arbitration agreements, and employers are quick to compel their enforcement in federal court.

Employees fear arbitration will be cost prohibitive and deprive them of significant rights, including a jury trial. Employers believe arbitration is a quicker more efficient way to resolve discrimination cases. Although the United States Supreme Court has enforced arbitration agreements in employment discrimination suits, it has recognized forcing an employee to arbitrate federal statutory rights may well be cost prohibitive under certain circumstances. See Green Tree.See Lewis v. Circuit City Stores, Inc., 500 F.3d 1140, 1151 fn. 12 (10th Cir. 2007)

The Tenth Circuit has invalidated arbitration agreements requiring employees to bear all or some of the expenses. See Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1233-35 (10th Cir. 1999) ("Shankle"). 


In Shankle, the plaintiff, a shift manager at a janitorial company, signed an arbitration agreement forcing the plaintiff to pay half the arbitration costs to assert employment claims, although the defendant promised to advance those costs if the plaintiff was unable to pay.  See Shankle, 163 F.3d at 1232.

When the defendant terminated the plaintiff for reasons the plaintiff alleged to be discriminatory under federal law, the parties submitted the dispute to the Judicial Arbiter Group (“JAG”) and selected an arbitrator. See Shankle, 163 F.3d at 1232. Upon learning JAG demanded a $6,000.00 deposit and the arbiter charges $250.00 per each hour of time, $45.00 for each hour of paralegal support time, the plaintiff cancelled the arbitration and filed in federal court.  See Shankle, 163 F.3d at 1232.  The defendant moved to compel arbitration.

The Tenth Circuit upheld the District Court’s denial of the motion to compel.See Shankle, 163 F.3d at 1234-35.  The Tenth Circuit reasoned:

Assuming Mr. Shankle’s arbitration would have lasted an average length of time, he would have had to pay an arbitrator between $1,875 and $5,000 to resolve his claims. Mr. Shankle could not afford such a fee, and it is unlikely other similarly situated employees could either. The Agreement thus placed Mr. Shankle between the proverbial rock and a hard place - it prohibited use of the judicial forum, where a litigant is not required to pay for a judge’s services, and the prohibitive cost substantially limited use of the arbitral forum. …  Essentially, B-G Maintenance required Mr. Shankle to agree to mandatory arbitration as a term of continued employment, yet failed to provide an accessible forum in which he could resolve his statutory rights. Such a result clearly undermines the remedial and deterrent functions of the federal anti-discrimination laws. (Shankle, 163 F.3d at 1234-35 (internal citations omitted)). 

The law in the Tenth Circuit appears to mandate that if an employer desires an arbitration agreement to be enforced, the employer must bear the costs of arbitration.