Many licensed employees in the securities industry are required to sign contracts obligating them to resolve their employment-related claims in arbitration rather than through the traditional judicial system.

Thus, employees licensed through the Securities and Exchange Commission (“SEC”), New York Stock Exchange (“NYSE”), National Association of Security Dealers (“NASD”) and Financial Industry Regulatory Authority (“FINRA”) are generally obligated to arbitrate their employment law claims through a Dispute Resolution Process.

Arbitration has also increasingly become a condition of employment for employees in the non-financial sector as well. For example, Circuit City has required its employees to sign arbitration agreements as a condition of their employment to prevent them from filing their employment claims in court. Employers generally view arbitration as a more cost-efficient resolution procedure than the court system.

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What is Arbitration?

Arbitration is a private dispute resolution process in which an arbitrator selected by the parties decides a case rather than a judge and jury. Arbitration is typically administered by the American Arbitration Association (“AAA”) or FINRA in the securities sector.

Much like the traditional court system, the aggrieved employee (the “claimant”) initiates arbitration by filing a Statement of Claim against his employer (the “respondent”) with AAA or FINRA. The arbitration agency then provides the parties a list of potential arbitrators who will ultimately decide the case.

The parties rank their arbitrators in order of preference and the agency selects the arbitrator whom the parties have mutually ranked the highest. In AAA arbitrations, one arbitrator is typically appointed to hear the case.

In FINRA arbitrations, a panel of three arbitrators is more common. Selecting the “right” arbitrator is an incredibly important part of the process.

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Advantages and Disadvantages of Arbitration

There are three principal advantages for employees bringing employment law claims in arbitration:

• First, arbitrators rarely dismiss a claim on written motions before the actual hearing occurs. In contrast, judges, especially those in federal courts, are much more likely to dismiss an employment law claim at a stage called “summary judgment”—before the jury even has a chance to hear evidence.
• Second, arbitrators are generally more liberal in allowing evidence, while judges more stringently follow the Federal Rules of Evidence.
• Finally, if an employee prevails in arbitration, the employer is much less likely to appeal the arbitration ruling than it would if the employee prevailed in court.

The primary disadvantages of arbitration for employees bringing employment law claims are that arbitrators generally issue smaller awards than juries, and they generally permit less discovery prior to the hearing.

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Can I Avoid Having to Arbitrate My Employment Claims If I Signed an Arbitration Agreement?

If an employee files a complaint in court in contravention of an agreement to arbitrate, in most instances, the courts will order the employee to re-file his or her claims through the arbitration process. However, courts make such rulings on a case-by-case basis depending on a number of factors, including the arbitration agreement language.

Accordingly, it is important to meet with employment counsel to determine if arbitration is a favorable forum for the employee’s claims and to assess the prospects for avoiding arbitration in the event it is not.

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Can I Bring The Same Types Of Legal Claims In Arbitration That I Could Have In Court?

Yes. The Federal Arbitration Act and other legislation have granted arbitrators jurisdiction to issue rulings and awards under state and federal law. For example, an arbitrator has the same power to issue a ruling and award under Title VII of the Civil Rights Act of 1964 or the Americans with Disabilities Act as would a state or federal court.

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We Can Help with Arbitration & Dispute Resolution

While arbitration has grown in popularity, the overwhelming majority of employment law claims are still filed and adjudicated in the court system. Fortunately, at Van Kampen Law we have experience representing clients in arbitration before the American Arbitration Association and various other financial industry arbitration forums. In fact, Van Kampen Law obtained a $1,250,000 verdict in an NASD arbitration against AG Edwards in 2005. If you have a potential arbitration claim for discrimination or sexual harassment, contact our office for a confidential consultation.