Study Finds Employer Bias in Overturning Arbitration Awards

April 21, 2008 ( - A new empirical study of federal and state court review of employment arbitral awards indicates that at the state level, courts are vacating many arbitration awards for employees, but not for employers.

According to a National Law Journal report, the new study, conducted by labor and employment law scholar Michael LeRoy of the University of Illinois College of Law, found state appellate courts confirmed only 56.4% of employee wins in arbitration,but confirmed 86.7% of employer awards. Similarly, in lower state courts 87.2% of employer awards were confirmed while 77.6% of employee wins were confirmed.

By comparison, the news report said, LeRoy’s database of 443 federal and state court rulings on arbitration awards — four levels of review, two in the federal court system and two in state systems — from 1975 to 2007, found federal appeals courts upheld 85.7% of employer wins and 85% of employee victories. Likewise, federal district judges enforced 92.2% of employer awards and 92.7% of employee wins.

LeRoy said the main reason for the difference between the state and federal court levels is that federal courts are essentially following the limited standards of judicial review established by the Federal Arbitration Act (FAA) and state courts are not. “The problem is that the number of award-reviewing standards is growing, due to new state laws and creeping expansion of common law standards,” LeRoy said, according to the National Law Journal.

Arbitrators may be unaware of varying state laws, and if the loser of an arbitration researches and finds the arbitrator has not complied with state law and the award can be vacated. LeRoy said employers, who are repeat players in the arbitration system are familiar with tactics to work the system, while employees – often one-time players in the system – are not.

LeRoy claims: “If state courts followed the four main elements for judicial review in Section 10 of the FAA, there would be 10% or fewer awards overturned.” He calls it a “remarkable irony” that employees are losing under state laws and standards, which were enacted to protect the weaker party in the relationship.

The National Law Journal said LeRoy’s findings are an important element in the re-examination of various parts of arbitration by members of Congress and others for legislative fixes.