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When Arbitration Isn't Arbitration

Employers love arbitration agreements. Arbitrators are rarely as shocked as juries are when they see egregious abuses of employees, rampant discrimination, unsafe working conditions or theft of employee wages. Consequently, employers prefer to have arbitrators, rather than juries, assess their liability on an employee grievance. On the other hand, many employers want then protections of the courts, so that when an arbitrator does something stupid -- as they sometimes do -- the employer can appeal the arbitration award to a trial court or a court of appeal.

One-sided appeal rights no longer past judicial scrutiny. In Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, the California Supreme Court reviewed an "appeal" provision that let any party seek review of an award of $50,000 or more. This, the court observed, left the employer free to appeal any substantial adverse award, but left employees with no right to seek review of a smalle award, or a defense award, which an employee would be more likely to challenge. But what if the agreement lets either side appeal?

That issue was addressed Monday in American Federation of State, County and Municipal Employees v. Metropolitan Water District of Southern California. Whether an agreement is one to arbitrate depends on the nature and effect of the proceeding. To create an arbitration, a dispute resolution procedure must establish that the arbitrator's decision is final and binding. The decision is not final and binding if it can be reviewed by a court. A not final and not binding arbitration process is not an "arbitration" within the mean of California Code of Civil Procedure §§ 1280, et seq., and it cannot be compelled as such.

The full text of the court's decision can be read or saved here as a Word document or pdf file.

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