Is arbitration still cost-effective? | Katz Melinger PLLC
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Is arbitration still cost-effective?

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For years, arbitration has been a crucial cost-saving measure for handling worker disputes. Employers have long preferred arbitration to the much more costly alternative of litigation. However, now, many plaintiffs and their lawyers are filing so many arbitration claims that it is overwhelming the system and jeopardizing the cost-saving nature of arbitration.

According to a recent report, the food delivery service DoorDash received around 6,000 arbitration claims by its employees in just one summer and was left with a bill for over $9 million. The company didn't make the payment, arguing that they couldn't verify that all the claims were legitimately coming from its delivery drivers. DoorDash's refusal to pay the bill essentially closed the active cases for the time being. However, in February, a federal judge in San Francisco ordered DoorDash to proceed with the arbitration cases and pay the fees. Other companies are facing similar issues.

New tactics could create a legal battleground for employers

Although employers once relished the idea of settling disputes out of court, they are now being forced to reconsider the benefits. It typically costs businesses $1,500 to start the arbitration process. On top of that, businesses could end up spending tens of thousands more on each arbitration case. If companies deal with too many claims at once, it can hurt their profit margins in the long-run. Because of this new development, many are looking at different approaches to protect themselves against these aggressive tactics. Some of those strategies include:

· Refusing to pay arbitration fees;

· Challenging the arbitration proceedings; and

· Generally prolonging the process, hoping employees will eventually drop out

However, such strategies have been largely unsuccessful so far, and alternate approaches are likely necessary.

Could this change the future of business litigation?

Many businesses are feeling the shock and disillusion mass arbitration can cause. As the system they've used for years seems to be hurting more than helping them, some may want to look for alternative solutions to settling disputes. If that's the case, they could benefit from the assistance of a trusted legal partner.

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