Labor & Employment Law Daily Wrap Up, NAA CORNER—Employment arbitration/Employment Litigation—Which is really better for my client?, (Aug 28, 2025)

By Theodore J. St. Antoine, NAA Member and Degan Professor of Law Emeritus, University of Michigan Law School, and Lewis Maltby, President, National Workrights Institute

Both employer and employee attorneys feel strongly enough about their perceptions that they engage in court battles over whether cases will be arbitrated or litigated.

Both employer and employee attorneys must choose a forum every time they open a new case. They generally make these decisions based on assumptions about the ways these forums differ. Both employer and employee attorneys feel strongly enough about their perceptions that they engage in court battles over whether cases will be arbitrated or litigated.

An intensive study of outcomes by a team of experienced employment academics[1] reveals that these assumptions are frequently wrong. In our study, we read every award issued in employment cases by AAA arbitrators in 2019 and 2020 and compared the results to the outcomes of all employment cases in federal court the same years. More recently, we examined AAA employment decisions and federal court decisions for 2023 and 2024, focusing on differences in damages.

The results were surprising, including to the researchers.

PERCEPTION—Employees seldom prevail in arbitration

REALITY—Employees prevail more often in arbitration

Several influential studies found that employees prevail more often in trials (31%) than in arbitration (19%). But these studies do not include cases resolved on pre-trial motions. In practice, 97% of all cases resolved by federal courts end in an employer victory by motion to dismiss or motion for summary judgment. Only 3% go to trial. Employees win a third of these cases, for an overall success rate of only 1%.

Dispositive motions are less common in arbitration. Dispositive motions are an established practice in federal courts and help judges manage crowded dockets. Major arbitration providers such as the American Arbitration Association discourage the use of dispositive motions, believing that “giving everyone their day in court” benefits all parties and improves their satisfaction with the process. Only 40% of employment arbitrations are resolved by motion. Of the remaining 60%, employees win 31% of the time (comparable to employee success rate in court trials) for an overall win rate of 19%.

The surprising result is that when all cases are considered, employees win far more often in arbitration (19%) than litigation (1%).

Settlements

It has been suggested that the results would be different if settlements were included in the analysis. This issue has not been included in research to date. Settlements are private so the data needed for this analysis is unavailable. However, the dynamics of litigation provide some insight into the likely result. An employee/plaintiff in court who has survived summary judgment is very likely to receive an attractive settlement offer. Employers are frightened of “runaway juries” and prefer to settle rather than trust twelve strangers they believe are prejudiced against “big business.” But an employer who has not yet filed for summary judgment (and knows that it will probably be granted) has little incentive to offer a settlement large enough to be considered an employee win.

Employees survive summary judgment in 8% of all cases filed in court.[2] Even assuming all these settlements are large enough to be considered employee victories and none of the settlements in arbitration is an employee victory (the actual rate is undoubtedly higher), employees win 19% of their cases in arbitration and only 9% of their cases in court.

PERCEPTION—Employees receive lower damages in arbitration

REALITY—In some types of cases, damages in arbitration and litigation are the same

In our study we reviewed every award received by employees for 2019-2020 and 2023-2024.

In contract cases, the amount a successful employee is due is relatively straightforward. Successful employees received the full amount they were legally entitled to in both arbitration and court. The same is true of wage and hour claims.

In discrimination cases, it is difficult to determine the right level of emotional distress damages and punitive damages. However, assuming that discrimination cases in the two systems are comparable, employees receive higher awards in court for emotional distress and punitive damages.

PERCEPTION—Arbitration is faster and less expensive than litigation

REALITY—Arbitration is faster and less expensive

The average length of time required to litigate an employment case in court is 31 months. In arbitration it is only half as long (14.8 months). Cases are also settled more quickly in arbitration, although the difference is less pronounced (12 months in litigation versus 9.7 months in arbitration).

Data on legal fees and expenses is not available. However, attorneys seldom stop working on a case while it is still pending. There is almost always one more thing that can be done to strengthen one’s case. Given this reality, it is highly likely that arbitration is significantly less expensive for both parties than litigation because arbitration cases are resolved more quickly.

This can be a significant factor for the party with fewer resources. In many cases, it can be the difference between being able to pursue a claim and having no access to justice. Several studies have been conducted of the minimum damages a plaintiff must have in order for an attorney to be financially able to file a claim on their behalf. The lowest estimate is $40,000.

Many cases do not have this level of damages. Of employees who won their cases in AAA arbitration in 2019-2020, 38% had damages less than $40,000. Arbitration offers access to justice for many employees with legitimate cases that they would not be able to litigate.

Conclusion

Our research discloses that while some common perceptions of the differences between arbitration and litigation are correct, others are not. The most important of these misperceptions is that employees win less often in arbitration than in court. In fact, employees win more often. The belief that employees receive larger awards in court is true for cases that involve emotional distress and punitive damages. In other types of cases, especially wage & hour and contract, damages are essentially the same. The only conventional wisdom about arbitration that is completely correct is that it is faster and less expensive.

This does not mean that arbitration is superior to litigation. In an adversary system, what is best for an employee-plaintiff is rarely best for an employer-defendant. But attorneys on both sides will make more informed choices about how to resolve disputes with a more accurate understanding about the relative performance of arbitration and litigation.

In some cases, this may lead attorneys on both sides to approach resolution differently than before. For example, management attorneys who insist on arbitration because they believe judges and juries are more likely to rule in employees’ favor may be more open to allowing employees to litigate claims (at least where non-economic damages are not a major concern). Employee attorneys may be more open to arbitrating cases knowing that their chances of success are higher than in court.

Whatever the outcome, both management and employee attorneys will make more informed decisions regarding forum selection with this new information.

About the authors. Theodore J. St. Antoine has been a labor arbitrator for more than 40 years. He was president of the National Academy of Arbitrators in 1999-2000 and is co-editor of the NAA’s The Common Law of the Workforce: The Views of Arbitrators. Lewis Maltby is president and founder of the National Workrights Institute and former Director of Employment Rights for the ACLU. He is the author of Can They Do That?: Retaking Our Fundamental Rights in the Workplace.

Footnotes:

1 Harold Katz (Cornell University), Lewis Maltby (National Workrights Institute), Theodore J. St. Antoine (University of Michigan Law School), and David Sherwyn (Cornell University)

2 The set of cases filed in court includes those that are ultimately settled, creating a higher settlement rate than the set that includes only those cases ultimately decided by the court.

Companies: National Academy of Arbitrators

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