Mandatory arbitration clauses in employment: Assessing the risks

Clauses that require arbitration of all employer-employee disputes are becoming ever more common in employment contracts. In a new essay, A Risk-Based Approach to Mandatory Arbitration, Scott Baker (North Carolina) analogizes such clauses to property insurance—both are methods for reducing risk.

“Using a risk analysis,” he writes, “the essay reexamines (1) the repeat player effect in arbitration, (2) why employers do so well in the litigation of discrimination disputes, and (3) the ‘adequacy’ requirement for arbitral forums. In particular, I consider whether mandatory arbitration accounts for the problems of moral hazard and adverse selection endemic to any risk management scheme.”