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September 10, 2024

AAA Employment Mass Arbitration Rules Update

Alexander Lindenfelser

On January 15, 2024, the American Arbitration Association and International Centre for Dispute Resolution (AAAICDR) amended its Mass Arbitration Supplementary Rules (“the Rules”). The Rules apply where there are 25 or more similar demands filed and where representation of all parties is consistent or coordinated across cases. Parties and their attorneys should be aware of the new challenges the Rules present in arbitrating mass employee claims, and in considering whether to file claims in mass arbitration.

Changes to Fee Schedule
There are now three different fee schedules for mass arbitrations in employment, consumer, and B2B and construction disputes. The updated employment fee schedule provides for a flat initiation fee. American Arbitration Association, Employment/Workplace Mass Arbitration and Mediation Fee Schedule:  Costs of Arbitration and Mediation, 1 (Jan. 15, 2024). The fee is $3,125 for individuals and $8,125 for the company, which must be paid when an individual files a mass arbitration. Id. For cases that proceed with administration beyond the initial fee, parties are responsible based on AAA’s fee schedule, which starts at $125 for individuals and $325 for the company. Id. at 2.

The costs of Merits Arbitrators are now borne by both parties. If Merits Arbitrators are directly appointed, the fee is $150 per case for individuals and $1,100 per case for the company. Id. The final fee is $750 per case and billed to the company when the evidentiary hearing is scheduled. Id. Unless the individual voluntarily pays a portion of the compensation post-dispute, the company is to pay the compensation for the Merits Arbitrator, Process Arbitrator, and Mediator. Id. at 3.

That is similar to the rule requiring the company to pay all arbitrator compensation, expenses, and fees, unless the parties have a separate agreement. Id. The arbitrator may not reallocate the arbitrator’s fees, unless otherwise required by law or if the arbitrator determines that a claim or counterclaim was filed for purposes of harassment or is patently frivolous. Id. If cases are stayed for any reason, the company shall pay a $2,500 fee every six months. Id. Where a third-party neutral is required, the company is responsible for $3,250 in fees plus $2,500 every six months and the neutral’s compensation. Id.

Changes to the Powers of the Process Arbitrator
The most significant changes to the Rules expand the Process Arbitrator’s powers. The appointment of a Process Arbitrator may be done either administratively by the AAA-ICDR or—at the discretion of the AAA-ICDR—by mutual agreement of the parties. American Arbitration Association, Mass Arbitration Supplementary Rules at MA-6 (Jan. 15, 2024); Id. at MA-7.

The Process Arbitrator may be appointed prior to the completion of the filing requirements by the parties. Id. at MA-6. The Process Arbitrator has authority to decide conditions precedent, payment of required costs, and the location of Merits hearings. Id. The Process Arbitrator also has the power to decide which demands should be included in or excluded from the mass arbitration, whether cases should be heard on an individual or group basis, whether subsequently filed cases can be included in the same mass arbitration, whether the rulings of the Process Arbitrator are binding on subsequent cases, and the process for selecting a Merits Arbitrator. Id. The Process Arbitrator also has the residual power to resolve non-merits disputes or any other issue the parties agree in writing to submit to the Process Arbitrator. Id.

The Process Arbitrator’s administrative involvement ceases when a Merits Arbitrator is appointed to a specific case, unless the parties agree otherwise. Id. However, the rules now allow the Merits Arbitrator to review the decisions of the Process Arbitrator for abuse of discretion. Id. Additionally, the Rules now empower the AAA-ICDR with the discretion to appoint a Mediator. Id. at MA-9. Once at the hearing stage, the Rules now state a preference for virtual hearings. Id. at MA-5.

Changes to Filing Requirements
The Mass Arbitration rules now require a representative to certify that the information contained in each demand, answer, counterclaim, and any amended claim is true and correct to the best of the representative’s knowledge. Id. at MA-2; Id. at MA-4. Claimant’s representatives must affirm the truth of each case filed. Id. at MA-2; id. at MA-3. Like Rule 11 in the Federal Rules of Civil Procedure, the representative must certify the truth of their filing. Fed. R. Civ. P. 11(b). Unlike Rule 11, however, the Mass Arbitration rules are silent as to whether a representative has an affirmative duty to conduct a reasonable inquiry into the filing and the thoroughness of such an inquiry. Compare id., with Mass Arbitration Supplementary Rules, supra.

Conclusion
In preparing to file mass arbitration actions, advocates must account for greater fees, develop arbitration strategies flexible enough to respond to weighty decisions made by Process Arbitrators, and stay vigilant of developments in the ethical implications of the certification requirement.

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Alexander Lindenfelser

Law Student

Alexander Lindenfelser is a summer law clerk at Nichols Kaster, PLLP, and University of Minnesota Law School Class of 2025. In his free time, he enjoys baking, painting and writing short stories.