Arbitration and Risk Management

 Arbitration is an alternative to litigation through which parties employ a third-party, nonjudicial decision maker to resolve their disputes. Employers may find arbitration to be cheaper, especially in terms of litigation costs, and more predictable (and perhaps even more likely to result in favorable outcomes). The rules of arbitration are governed entirely by private ordering, though often, parties opt for an established arbitration service, such as the American Arbitration Association, which has developed rules and qualified arbitrators. In recent years, the Supreme Court has provided especially strong enforcement of the Federal Arbitration Act, 9 U.S.C. §2,  which provides that arbitration agreements will be voided only on the same, narrow grounds as other contracts, such as unconscionability and duress.  If a party who has signed an arbitration agreement files suit in court, the FAA commands the judge to stay the proceedings and direct the employee to seek exclusive relief in an arbitral forum.  While there are several limitations on the statute’s scope, the Supreme Court has applied it extraordinarily broadly. As a result, the FAA may often preempt other rules and protections, including those on discrimination.