Cornell Study Says Arbitration Is Better than Litigation

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. October 14, 2008

PROMPT AND FAIR:

Employer-mandated Arbitration May Be Best for Resolving Employment Discrimination Claims

ITHACA, NY, July 11, 2006. While most employee advocates argue that the federal or state court is the best venue for victims of employment discrimination, an analysis by Cornell Professor David Sherwyn finds that arbitration may be a better method to resolve discrimination claims both for employees and employers. The new report, "Mandatory Arbitration: Why Alternative Dispute Resolution May Be the Most Equitable Way to Resolve Discrimination Claims," is available at no charge from the Cornell Center for Hospitality Research, at http://www.hotelschool.cornell.edu/chr/research/centerreports.html.

"Before anyone goes to an arbitrator or to a judge, the parties should attempt to work out their own solution to discrimination claims," said Sherwyn, who is an associate professor of law at the Cornell School of Hotel Administration. "When agreement cannot be reached, however, I've found that arbitration seems to work better than litigation for both employees and employers. I say this partly because low-paid employees, who might have a claim for a relatively small amount of back pay, have a difficult time getting their day in court, due to the expense of litigation. On the other side, employers are forced to settle meritless cases because the cost of litigation defense is so high. Not only is arbitration less expensive for both parties, it is much faster than going to court."

In response to a perceived increase in litigation, the number of employers that require employees to agree to mandatory arbitration of disputes as a condition of employment has increased in recent years. Critics of mandatory arbitration argue that arbitration works to the disadvantage of employees.

"While it's difficult to make a direct comparison between cases that go through arbitration and those that end up in court, my analysis found no support for the idea that arbitration necessarily favors one side or the other," Sherwyn said. The report analyzes studies by several researchers, none of whom found that arbitrators were biased in favor of employers.

Sherwyn's report presents a case study of a large employer that implemented a program of alternative dispute resolution. Even as the company expanded rapidly and dealt with an increasing number of complaints, the number of claims that went to arbitration or to court was under 10 percent-compared with 26 percent of those handled by the Equal Employment Opportunity Commission. More important to both employees and the company's managers, the average length of time to resolve a discrimination claim for this company was under two weeks, compared to over one year for the typical EEOC discrimination claim.

All CHR Reports and Tools are available from the Center's web site, www.chr.cornell.edu. Thanks to the support of the partners listed below, all CHR Reports and Tools are made available free of charge.

About The Center for Hospitality Research

A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the Center's 48 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The Center also publishes the award-winning hospitality journal, the Cornell Hotel and Restaurant Administration Quarterly. To learn more about CHR and its projects, visit www.chr.cornell.edu.

CHR Partners and sponsors: AIG Global Real Estate Investment, Cendant Corporation, Four Seasons Hotels and Resorts, HVS International, JohnsonDiversey, Inc., Kohinoor Group, Marsh's Hospitality Practice, Nestl'e, Smith Travel Research, Southern Wine and Spirits of America, Inc., SynXis (a Sabre Holdings Corporation), Taj Hotels Resorts and Palaces, Thayer Group of Companies, and Wimberly Allison Tong & Goo.

CHR friends: 4Hoteliers.com o ARAMARK o DK Shifflet & Associates o ehotelier.com o Estrela Marketing Solutions o Fireman's Fund o Gerencia de Hoteles & Restaurantes o Global Hospitality Resources o Hospitality Confections o Hospitality Financial and Technology Professionals (HFTP) o hospitalityInside.com o hospitalitynet.org o Hotel Asia Pacific o Hotel China o HotelExecutive.com o Hotel Interactive o Hotel Resource o International CHRIE o International Hotel and Restaurant Association o International Hotel Conference o iPerceptions o KPMG Japan/Global Management Directions o Lodging Hospitality o Lodging Magazine o PKF Hospitality Research o Resort+Recreation o The Resort Trades o RestaurantEdge.com o Shibata Publishing Co. o The Lodging Conference o Taste & Travel o TravelCLICK o UniFocus o WageWatch, Inc. o WiredHotelier.com

Glenn Withiam, 607.255.3025; [email protected]