< Return To Hearing
December 12, 2007
Statement of the American Arbitration Association
Subcommittee on the Constitution
Wednesday, December 12, 2007
Good morning, Chairman Feingold, Senator Brownback, and members of the Subcommittee. I am Richard Naimark, Senior Vice President of The American Arbitration Association (AAA). We appreciate the opportunity to testify before the Subcommittee today.
As the world's largest provider of alternative dispute resolution ("ADR") services, including arbitration, the AAA has pioneered the development of arbitration rules, protocols and codes of ethics and we share our experience with the subcommittee.
The AAA is a not-for-profit public service organization with an 81-year history in the administration of justice. Arbitrators who hear cases that are administered by the AAA are not employees of AAA, but are independent neutrals screened and trained. AAA does not represent the ADR industry or other arbitral institutions, but as a result of our unique position and longstanding work in the field of alternative dispute resolution, we believe we have an important contribution to make to the subject matter of the hearing taking place today.
We must make no mistake in our focus on this subject, the primary issue at hand is access to justice.
The reality in this country is that our legal system is difficult to navigate for most Americans. Claims
Arbitration provides a fair, efficient, and cost-effective mechanism for the resolution of disputes when implemented fairly and impartially, in accordance with due process protocols:
? A recent analysis of 2006 AAA consumer cases, in which the consumer is the claimant, yielded an 81% favorable outcome for the consumer (58% voluntary settlement; 48% outright win, per award of arbitrator of the remaining cases going to an award).
? A similar analysis of 2006 employment cases administered by the AAA found that the employee had a favorable outcome 77% of the time.
These figures may seem astonishing to you (additional information and methodology described in Annex D). How can this data be reconciled with other data and anecdotal information being offered?
The AAA, recognizing that the use of arbitration in consumer agreements presented some unique issues,a decade ago convened a group of representatives of consumer, academic, government, and industry groups to examine these issues. This National Consumer Disputes Advisory Committee (Annex A)
The AAA and a few other organizations have implemented this Protocol, but others have not. In the employment arena, the AAA similarly convened the Task Force on Alternative Dispute Resolution in Employment, a coalition of employee, business and regulatory interests, to develop the Employment
Arbitration between a consumer and a business, or an employee and a business, must incorporate these safeguards to ensure a level playing field, maintaining basic procedural fairness of the process. These Protocols have been in operation for nearly a decade and have proven effective and reliable. Courts
Key Provisions of the Consumer Due Process Protocols:
? Consumers and businesses have a right to an independent and impartial neutral and independent
? Consumers and employees always have a right to representation.
? Costs of the process must be reasonable.
? Location of the proceeding must be reasonably accessible.
? No party may have unilateral choice of arbitrator.
? There shall be full disclosure by arbitrators of any potential conflict or appearance of conflict or
? There shall be no limitation of remedy that would otherwise be available.
? Small claims may opt out where there is small claims court jurisdiction.
? Parties to the dispute must have access to information critical to resolution of the dispute.
? The use of mediation to foster voluntary resolution of the matter.
? Clear and adequate notice of the arbitration provision and its consequences, including a
Congress can address the problems in the use of arbitration in consumer and employment disputes by codifying the standards and protections developed by the National Consumer Disputes Advisory
One final note: Any legislation designed to shape the consumer and employment arbitration process should not modify the Federal Arbitration Act (FAA), but rather, should be accomplished with a piece of companion legislation. The FAA is a piece of omnibus serving a very broad sphere of arbitration activity
Dated: April 17, 1998
Some of the signatories to this Protocol were designated by their respective organizations, but the Protocol reflects their personal views and should not be construed as representing the policy of the designating organizations.
The Honorable Winslow Christian
William N. Miller, Co-chair
David B. Adcock
Anita B. Metzen
Steven G. Gallagher
James A. Newell
Michael F. Hoellering
Shirley F. Sarna
J. Clark Kelso
Daniel C. Smith
Terry L. Trantina
Deborah M. Zuckerman
Robert E. Meade
Consumer Due Process PROTOCOL
Statement of Principles of the National Consumer Disputes Advisory Committee
Statement of Principles
STATEMENT OF PRINCIPLES
PRINCIPLE 1. FUNDAMENTALLY-FAIR PROCESS
All parties are entitled to a fundamentally-fair ADR process. As embodiments of fundamental fairness, these Principles should be observed in
PRINCIPLE 2. ACCESS TO INFORMATION REGARDING ADR PROGRAM
Providers of goods or services should undertake reasonable measures to provide Consumers with full and accurate information regarding
PRINCIPLE 3. INDEPENDENT AND IMPARTIAL NEUTRAL; INDEPENDENT ADMINISTRATION
1. Independent and Impartial Neutral. All parties are entitled to a Neutral who is independent and impartial.
2. Independent Administration. If participation in mediation or arbitration is mandatory, the procedure should be administered by an
4. Selection of Neutrals. The Consumer and Provider should have an equal voice in the selection of Neutrals in connection with a
5. Disclosure and Disqualification. Beginning at the time of appointment, Neutrals should be required to disclose to the Independent ADR Institution any circumstance likely to affect impartiality, including any bias or financial or personal interest which might affect the result of the ADR proceeding, or any past or present relationship or experience with the parties or their representatives, including past ADR experiences. The Independent ADR Institution should communicate any such information to the parties and other Neutrals, if any. Upon objection of a party to continued service of the Neutral, the Independent ADR Institution should determine whether the Neutral should be disqualified and should inform the parties of its decision. The disclosure obligation of the Neutral and procedure for disqualification should continue throughout the period of appointment.
PRINCIPLE 4. QUALITY AND COMPETENCE OF NEUTRALS
PRINCIPLE 5. SMALL CLAIMS
PRINCIPLE 6. REASONABLE COST
1. Reasonable Cost. Providers of goods and services should develop ADR programs which entail reasonable cost to Consumers
2. Handling of Payment. In the interest of ensuring fair and independent Neutrals, the making of fee arrangements and the payment of
In the case of face-to-face proceedings, the proceedings should be conducted at a location which is reasonably convenient to both parties with
PRINCIPLE 8. REASONABLE TIME LIMITS
ADR proceedings should occur within a reasonable time, without undue delay. The rules governing ADR should establish specific reasonable
PRINCIPLE 9. RIGHT TO REPRESENTATION
All parties participating in processes in ADR Programs have the right, at their own expense, to be represented by a spokesperson of their own
PRINCIPLE 10. MEDIATION
PRINCIPLE 11. AGREEMENTS TO ARBITRATE
Consumers should be given:
a. clear and adequate notice of the arbitration provision and its consequences, including a statement of its mandatory or
PRINCIPLE 12. ARBITRATION HEARINGS
1. Fundamentally-Fair Hearing. All parties are entitled to a fundamentally-fair arbitration hearing. This requires adequate notice of
2. Confidentiality in Arbitration. Consistent with general expectations of privacy in arbitration hearings, the arbitrator should make
PRINCIPLE 13. ACCESS TO INFORMATION
No party should ever be denied the right to a fundamentally-fair process due to an inability to obtain information material to a dispute.
PRINCIPLE 14. ARBITRAL REMEDIES
PRINCIPLE 15. ARBITRATION AWARDS
1. Final and Binding Award; Limited Scope of Review. If provided in the agreement to arbitrate, the arbitrator's award should be final
2. Standards to Guide Arbitrator Decision-Making. In making the award, the arbitrator should apply any identified, pertinent contract
3. Explanation of Award. At the timely request of either party, the arbitrator should provide a brief written explanation of the basis for the award. To facilitate such requests, the arbitrator should discuss the matter with the parties prior to the arbitration hearing.
For further detail and commentary please see WWW.ADR.ORG , Consumer Arbitration Rules
Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising Out of the
The following protocol is offered by the undersigned individuals, members of the Task Force on Alternative Dispute Resolution in Employment, as a means of providing due process in the resolution by mediation and binding arbitration of employment disputes involving statutory rights. The signatories
This Task Force was created by individuals from diverse organizations involved in labor and employment law to examine questions of due process arising out of the use of mediation and arbitration for resolving employment disputes. In this protocol we confine ourselves to statutory disputes.
The members of the Task Force felt that mediation and arbitration of statutory disputes conducted under
A. Pre or Post Dispute Arbitration
B. The Task Force recognizes the dilemma inherent in the timing of an agreement to mediate and/or
Employers should be able to create mediation and/or arbitration systems to resolve statutory claims, but any agreement to mediate and/or arbitrate disputes should be informed, voluntary, and not a condition of initial or continued employment.
Employers should have the right to insist on an agreement to mediate and/or arbitrate statutory disputes as a condition of initial or continued employment. Postponing such an agreement until a dispute actually arises, when there will likely exist a stronger redisposition to litigate, will result in very few agreements to mediate and/or arbitrate, thus negating the
Employees should not be permitted to waive their right to judicial relief of statutory claims arising out of
Employers should be able to create mediation and/or arbitration systems to resolve statutory claims, but
The Task Force takes no position on the timing of agreements to mediate and/or arbitrate statutory
B. Right of Representation
1. Choice of Representative
Employees considering the use of or, in fact, utilizing mediation and/or arbitration procedures should
2. Fees for Representation
The amount and method of payment for representation should be determined between the claimant and the representative. We recommend, however, a number of existing systems which provide employer reimbursement of at least a portion of the employee's attorney fees, especially for lower paid employees.
3. Access to Information
One of the advantages of arbitration is that there is usually less time and money spent in pre-trial discovery. Adequate but limited pre-trial discovery is to be encouraged and employees should have access to all information reasonably relevant to mediation and/or arbitration of their claims. The employees' representative should also have reasonable pre-hearing and hearing access to all such information and documentation.
Necessary pre-hearing depositions consistent with the expedited nature of arbitration should be available. We also recommend that prior to selection of an arbitrator, each side should be provided with the names, addresses and phone numbers of the representatives of the parties in that arbitrator's six most
C. Mediator and Arbitrator Qualification
1. Roster Membership
Mediators and arbitrators selected for such cases should have skill in the conduct of hearings, knowledge of the statutory issues at stake in the dispute, and familiarity with the workplace and employment environment. The roster of available mediators and arbitrators should be established on a nondiscriminatory basis, diverse by gender, ethnicity, background, experience, etc. to satisfy the parties that
Our recommendation is for selection of impartial arbitrators and mediators. We recognize the right of employers and employees to jointly select as mediator and/or arbitrator one in whom both parties have requisite trust, even though not possessing the qualifications here recommended, as most promising to
There is a manifest need for mediators and arbitrators with expertise in statutory requirements in the employment field who may, without special training, lack experience in the employment area and in the conduct of arbitration hearings and mediation sessions. Reexamination of rostering eligibility by
The roster of arbitrators and mediators should contain representatives with all such skills in order to meet the diverse needs of this caseload.
Regardless of their prior experience, mediators and arbitrators on the roster must be independent of bias toward either party. They should reject cases if they believe the procedure lacks requisite due process.
The creation of a roster containing the foregoing qualifications dictates the development of a training program to educate existing and potential labor and employment mediators and arbitrators as to the statutes, including substantive, procedural and remedial issues to be confronted and to train experts in the statutes as to employer procedures governing the employment relationship as well as due process and fairness in the conduct and control of arbitration hearings and mediation sessions.
Training in the statutory issues should be provided by the government agencies, bar associations,academic institutions, etc., administered perhaps by the designating agency, such as the AAA, at various locations throughout the country. Such training should be updated periodically and be required of all
Successful completion of such training would be reflected in the resume or panel cards of the arbitrators supplied to the parties for their selection process.
3. Panel Selection
Upon request of the parties, the designating agency should utilize a list procedure such as that of the
The selection process could empower the designating agency to appoint a mediator and/or arbitrator if the striking procedure is unacceptable or unsuccessful. As noted above, subject to the consent of the parties, the designating agency should provide the names of the parties and their representatives in recent cases decided by the listed arbitrators.
4. Conflicts of Interest
The mediator and arbitrator for a case has a duty to disclose any relationship which might reasonably constitute or be perceived as a conflict of interest. The designated mediator and/or arbitrator should be required to sign an oath provided by the designating agency, if any, affirming the absence of such
5. Authority of the Arbitrator
The arbitrator should be bound by applicable agreements, statutes, regulations and rules of procedure of the designating agency, including the authority to determine the time and place of the hearing, permit reasonable discovery, issue subpoenas, decide arbitrability issues, preserve order and privacy in the
The arbitrator should be empowered to award whatever relief would be available in court under the law. The arbitrator should issue an opinion and award setting forth a summary of the issues, including the type(s) of dispute(s), the damages and/or other relief requested and awarded, a statement of any other
6. Compensation of the Mediator and Arbitrator
Impartiality is best assured by the parties sharing the fees and expenses of the mediator and arbitrator. In cases where the economic condition of a party does not permit equal sharing, the parties should make mutually acceptable arrangements to achieve that goal if at all possible. In the absence of such
D. Scope of Review
The arbitrator's award should be final and binding and the scope of review should be limited.
Christopher A. Barreca, Co-Chair
Max Zimny, Co-Chair
Carl E. VerBeek
Robert D. Manning
Charles F. Ipavec, Arbitrator
George H. Friedman
Michael F. Hoellering
W. Bruce Newman
Joseph Garrison, President
ADDITIONAL INFORMATION AND COMMENTS ON STATISTICS AND DATA
In 2006 there were 1,235 AAA employment arbitrations resolved. Employees received a favorable outcome in 77% of these cases. Seventy-one percent (71%) of these cases were resolved by settlement or withdrawl prior to an award. The remaining 29% or 354 cases proceeded to an award. Employees received a monetary award in 22% of the cases that proceeded to an award. The employee was selfrepresented in 100 of the cases that proceeded to an award (28% of the 354 awarded cases). On average,
1. AAA employment statistics and information presented in this testimony are based on employment cases determined by the AAA to arise out of employer-promulgated plans and do not include case statistics that involve individually-negotiated employment agreements.
2. When an employment arbitration is filed, the AAA makes an initial administrative determination as to whether the dispute arises from an employer-promulgated plan or an individually-negotiated employment agreement or contract. This determination is made by reviewing the documentation provided to the AAA by the parties, including, but not limited to, the demand for arbitration, the parties' arbitration program or agreement, and any employment agreements or contracts between the parties. The AAA's review is focused on two primary issues. The first component of the review focuses on whether the arbitration program and/or agreement between the individual employee and the employer is one in which it appears that the employer has drafted a standardized arbitration clause with its employees. The second aspect of the review focuses on the ability of the parties to negotiate the terms and conditions of the parties' agreement. If a party disagrees with the AAA's initial
In 2006 there were 987 AAA consumer arbitrations resolved in which the consumer initiated the case. Fifty-eight percent were resolved prior to an award. The remaining 42% (414 cases) proceeded to an award. Consumers received a monetary award in 48% of the cases that proceeded to an award. On average, consumer cases are resolved in 3.8 months for cases proceeding on documents alone (34% of awarded cases) and in 7.4 months for cases with an in-person hearing (66% of awarded cases). Pursuant
1. AAA consumer statistics presented in this testimony are based on cases that were administered under the AAA's Supplementary Procedures for Consumer-Related Disputes and initiated by the consumer.
2. In 2006, 1,294 consumer arbitration cases were filed with the AAA and 77% of these cases were filed by
3. AAA applies Supplementary Procedures for Consumer-Related Disputes when an arbitration clauses exist in an