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USA: Arbitrators at 3 of largest arbitration firms not sufficiently diverse, says report

When it comes to issues like racial discrimination and sexual harassment in the workplace, as well as service problems and contract disputes with corporations, millions of Americans are barred from suing companies in court. Instead, consumers and employees are forced to pursue a private dispute resolution method called arbitration. And it turns out that system can be even less diverse than the federal court system. 

A new report from the American Association for Justice released Monday shows that arbitrators at JAMS, American Arbitration Association and the Financial Industry Regulatory Authority [FINRA] three of the largest arbitration service providers in the country, are mostly male and overwhelmingly white.

Female arbitrators make up less than a third of the overall arbitrators employed by the three organizations, while less than 1 in 5 arbitrators identify as Asian, Black, Hispanic and races other than white.

FINRA, which has been disclosing the demographics of its arbitrators since 2015, tells CNBC Make It that a diverse pool of knowledgeable and experienced arbitrators is a priority for the organization...

AAA said in a statement to CNBC Make It that the diversity of its arbitrators does vary by sector. Last year, arbitrators on its employment panel were 42% diverse in terms of gender or ethnicity and its consumer panel was 31% diverse. AAA also attempts to provide parties with a list of arbitrators that is at least 20% diverse, although this may not be possible in some cases...

JAMS fully recognizes the value that diverse panelists bring to our organization and the arbitration process, and we have made it a top priority to increase the number of diverse neutrals on our panel...” the company said in a statement, adding that nine of 33, or about 27%, of those added to the JAMS panel last year were ethnically diverse...

...[T]he gender and race of an arbitrator can have an impact on the outcome of a case. Female arbitrators, for example, rule in favor of employees more often than male arbitrators, and typically award higher settlement amounts, according to AAJ’s report.

But companies usually pay the arbitration costs and typically get a say in the arbitrator selected for the case. So even when women are available, companies don’t agree to female arbitrators as often — male arbitrators are presiding over more cases per person than female arbitrators, according to AAJ’s research...