LABOR STANDARDS VIOLATIONS AND EMPLOYMENT ARBITRATION: AN EMPIRICAL ASSESSMENT

With the rise of employer-promulgated mandatory employment arbitration, scholars have become concerned that these policies may reduce the economic viability of lower value employment claims. Of particular worry are claims made under the Fair Labor Standards Act since the FLSA does not include punitive damages. This study empirically tests the relationship between 368 Fortune 1000 companies’ employment arbitration policies and their wage and hour violations discovered during the Department of Labor inspections. Surprisingly, firms that used arbitration were found to have fewer violations and lower back wages for those violation compared to firms that did not use arbitration. This suggests that viewing arbitration merely as a cost-reduction tool may cast the practice too narrowly and instead it may be part of a larger conflict management system that seeks to address conflict at the earliest possible stage.