Costs and fees in employment arbitration

The allocation of arbitration costs affects both enforceability and outcomes.

The vindication concern. Cost-splitting provisions that make it prohibitively expensive for an employee to pursue a statutory claim have been found unenforceable. Courts examine the employee’s ability to pay and the difference between the arbitration cost and the cost of litigation.

Provider rules. The major administrators require employers to pay all arbitrator compensation and administrative fees beyond a nominal filing fee in employee-initiated cases, which resolves most of the concern in practice.

Employer non-payment. Several states now provide that an employer’s failure to pay fees within a stated period is a material breach, waiving the right to arbitrate and permitting the employee to proceed in court, with mandatory sanctions. This has become significant in mass arbitration disputes.

Mass arbitration. Coordinated filing of many individual demands generates large aggregate fees payable by the employer before any merits determination. Responses include batching provisions, bellwether procedures and mediation requirements in the agreement, some of which have themselves been challenged.

Fee awards. Statutory fee-shifting provisions apply in arbitration, and an agreement purporting to eliminate them is generally unenforceable as to statutory claims.