The American Arbitration Association (AAA) has updated its Employment Arbitration Rules, effective May 1, 2025. The changes may make AAA-administered arbitration less desirable for businesses.
Key Takeaways
- Disputes with solo independent contractors now fall under the Employment/ Workplace Rules and Fee Schedule, which means the company must pay nearly all administrative fees instead of splitting costs as is typical in Commercial Rules disputes.
- The amended Employment/Workplace Rules discourage dispositive motions.
- Parties can – and often should – modify the default AAA rules in their arbitration agreements if they continue to designate AAA as their arbitration administrator.
R-1. Applicable Rules of Arbitration
AAA has changed the name of the Employment Rules to the Employment/Workplace Rules. With this change, AAA now requires use of the Employment/Workplace Rules in disputes with an unincorporated solo independent contractor, even if the parties had agreed to use the Commercial Arbitration Rules. AAA adopted a corresponding change in the Commercial Rules.
The main impact of this change is that AAA will apply the Employment/Workplace Fee Schedule to such disputes, even if the parties entered into their arbitration agreement under the prior rules. Under this fee schedule, the independent contractor would be responsible for no more than $300 in administrative fees and arbitrator’s fees. The company must pay the rest, including administrative fees, case management fees and the arbitrator’s fee. That’s more than $2,500 in up-front fees before the arbitrator is even selected.
The rules now presume that a dispute with an independent contractor is an employment-related dispute, even when it’s not.
Suggestion: Employers and business owners should review all independent contractor agreements with arbitration clauses and consider drafting revisions to get around this rule change. If the independent contractor brings an employment-related claim, such as an allegation of misclassification, then the parties are probably stuck with the Employment/ Workplace Rules and Fee Schedule. However, careful drafting may allow the parties to sidestep this new rule and preserve the Commercial Rules and Fee Schedule for purely commercial disputes, such as breach-of-contract claims.
Alternatively, businesses might consider not using AAA at all for arbitrations with solo independent contractors. There are other good reasons for not designating AAA or any other third-party arbitration service in an arbitration agreement, especially if there are concerns about possible mass arbitration filings.
R-32. Motions
The new rules discourage arbitrators from considering prehearing dispositive motions.
The Employment/Workplace Rules now specify:
- The arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines the moving party has shown that the motion is likely to succeed and to dispose of or narrow the issues in the case.
- Consistent with the goal of achieving an efficient and economical resolution of the dispute, the arbitrator shall consider the time and cost associated with the briefing of a dispositive motion in deciding whether to allow any such motion.
- The arbitrator has the sole discretion to allow or deny the filing of a written motion, and the arbitrator’s decision is final.
Suggestion: Dispositive motions are important tools to help businesses dispose of meritless claims and avoid unnecessary hearing expenses. Employers and business owners should consider revising arbitration agreements to override this new rule and to preserve the parties’ right to file dispositive motions.
R-42(c). Publication of Awards
The new rulesallow AAA to publish awards, but with names redacted. This is a major change from the default rule of confidentiality in arbitration.
New Rule 42(c) states, “The AAA may choose to publish an award rendered under these Rules; however, the names of the parties and witnesses will be removed from awards that are published.”
Suggestion: Confidentiality is one of the key benefits of arbitration. A published award could reveal the identity of the company based on its description, even if the company is not named. Businesses should consider adding a clause to their arbitration agreements to deny AAA the right to publish any award.
Takeaways
The revised AAA Employment/Workplace Arbitration Rules contain several new terms that are undesirable for businesses. Companies should consider revising their arbitration agreements to try to avoid the application of these new rules. But note that AAA is applying the new rules even when parties entered into their arbitration agreements under the old rules.
Alternatively, companies might consider not designating AAA or any other third party to administer its arbitrations. Nothing in the Federal Arbitration Act or state arbitration laws requires the use of a third-party administrator.
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