Arbitration Agreements in the Workplace

Table of Contents

1. What Is an Arbitration Agreement?
2. Why Employers Favor Arbitration
3. How Arbitration Affects Employees
4. Key Legal Cases
5. Recent Legislative Changes
6. What You Can Do If You’re Asked to Sign One
7. Final Thoughts

What Is an Arbitration Agreement?

More and more U.S. workers are being asked to sign something called an arbitration agreement when they start a new job. These agreements are now so common that more than half of private-sector, non-union workers in the U.S. are covered by one.

An arbitration agreement typically means that if you have a legal dispute with your employer—such as discrimination, harassment, or wage theft—you must resolve it through private arbitration, not in court. There’s no judge or jury, and often no right to appeal. Many of these agreements also include class action waivers, meaning you can’t join together with co-workers to file a group lawsuit, even if you all have the same issue.

These clauses are often buried in hiring documents or employee handbooks. Many employees don’t even realize they’ve agreed to them until they try to assert their rights.

Why Employers Favor Arbitration

Employers often say arbitration is faster, cheaper, and more efficient than court. But it also gives them significant advantages:

• They often get to choose the arbitrator or arbitration service
• The process is confidential
• There is limited discovery, making it harder for employees to gather evidence
• The decisions are final and typically not appealable

From a business standpoint, it limits financial and reputational risks. But for employees, it often means less favorable outcomes and lower compensation.

How Arbitration Affects Employees

Studies show that employees win less often in arbitration and recover lower damages compared to court cases. Arbitration also makes it harder to draw public attention to systemic problems, especially in industries like:

• Retail
• Food service
• Healthcare

These sectors also employ higher percentages of women, people of color, and low-wage workers, raising concerns about fairness and discrimination.

In many cases, workers have no real choice but to accept these agreements if they want the job.

Key Legal Cases

Karen Ward v. Ernst & Young

Karen Ward sued Ernst & Young for sexual harassment. But because she had signed an arbitration agreement, she was forced into private arbitration, where she spent over $185,000 just to have her case heard. In contrast, filing a case in court could have cost her only a few hundred dollars.

Her case drew national attention and became a key example of how forced arbitration can silence victims.

Epic Systems v. Lewis (2018)

In this landmark decision, the U.S. Supreme Court ruled that employers can require workers to waive their right to join class-action lawsuits as part of arbitration agreements. This ruling made it easier for companies to enforce mandatory arbitration clauses and led to a spike in their use.

Recent Legislative Changes

In 2022, Congress passed a federal law banning forced arbitration in sexual harassment and sexual assault cases. This means employees can now choose to go to court for these types of claims, even if they signed an arbitration agreement.

However, other claims—like wage and hour violations, retaliation, and racial discrimination—can still be subject to forced arbitration.

Advocates are pushing for broader reform through the FAIR Act, which would ban forced arbitration in all employment cases. As of now, that legislation has not passed.

What You Can Do If You’re Asked to Sign One

If you’re presented with an arbitration agreement at work, here’s how to protect yourself:

1. Read it carefully
   Look for phrases like “waive right to jury trial” or “class action waiver.” These are major red flags.
2. Ask if you can opt out
   Some agreements allow you to decline arbitration within a set time (usually 30 days). Follow the instructions exactly and get confirmation in writing.
3. Assess your leverage
   If you’re in a high-demand role or have multiple job offers, you might be able to negotiate different terms or remove the clause altogether.
4. Know your rights
   Even if you sign, you can still file complaints with agencies like the EEOC or Department of Labor. Arbitration doesn’t block those paths.
5. Talk to a lawyer
   Employment attorneys can review your agreement, explain your rights, and help you challenge unfair terms. Many offer free or low-cost consultations.
6. Talk to coworkers
   If others are concerned, consider raising the issue as a group. Group discussions about workplace conditions are legally protected.
7. Understand the limitations
   Arbitration doesn’t mean you lose all rights—but it changes how you assert them. You may lose access to a public trial or full discovery.
8. Stay updated
   Laws are changing quickly. Follow updates on state and federal employment laws, especially those involving arbitration and worker protections.

Final Thoughts

Forced arbitration affects millions of workers and limits their access to fair and open legal processes. Understanding what these agreements mean—and what rights you may be signing away—is critical for protecting yourself at work.

If you’re unsure about an arbitration clause in your employment contract, don’t ignore it. Get informed, ask questions, and seek advice. Whether you’re a new hire or a long-time employee, knowledge is your best defense.

Forced arbitration isn’t just a legal technicality. It’s a real-world issue that affects your ability to speak up, get justice, and hold employers accountable. Being informed is your best protection.