Procedure· 13 min read

Arbitration Agreements in Employment: Enforceability, Challenges, and Your Options

Most workers in the United States signed an arbitration agreement before they started their job. It was in the onboarding packet, next to the direct deposit form.

Most workers in the United States signed an arbitration agreement before they started their job. It was in the onboarding packet, next to the direct deposit form. They signed it because not signing wasn't a real option. And by signing it, they gave up the right to a jury trial for virtually any dispute with their employer — including discrimination, harassment, and retaliation claims. Understanding what this means, when these agreements can be challenged, and what options remain is increasingly essential employment law knowledge.

What an Arbitration Agreement Does

An arbitration agreement requires disputes to be resolved by a private arbitrator rather than through the court system. There's no jury. Discovery is limited. The process is largely confidential. The arbitrator is typically selected from a pool maintained by a private arbitration company — one the employer has contracted with and often has a long-term relationship with. Awards in employment arbitration tend to be lower than jury verdicts on comparable claims. Critically, arbitration agreements often include class action waivers, prohibiting workers from joining together to challenge employer conduct collectively. In Epic Systems Corp. v. Lewis (2018), the Supreme Court held that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act, a ruling that significantly limited collective action in employment disputes.

What Arbitration Agreements Can't Cover

Filing a charge with the EEOC is not arbitration. Workers retain the right to file EEOC charges and participate in EEOC investigations regardless of any arbitration agreement — these are rights that cannot be contractually waived. The EEOC itself is not bound by the agreement and can investigate and litigate on its own authority. Sexual harassment and sexual assault claims now have explicit statutory protection. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (2022) prohibits enforcement of pre-dispute mandatory arbitration clauses for sexual harassment and assault claims. Workers can elect to bring these claims in court even if they signed a broad arbitration agreement before the conduct occurred.

Grounds to Challenge Enforceability

Not all arbitration agreements are enforceable. Courts apply state contract law to evaluate them, which means unconscionability doctrine, mutual assent, and consideration requirements all apply. Common grounds for challenge include: the agreement is unconscionable in its terms (shockingly one-sided, with no limits on employer claims but sweeping limits on worker claims); there was no real mutual assent (the agreement was buried in a packet and never explained); the agreement requires the worker to pay arbitration fees they cannot afford; or the agreement lacks mutuality (the employer can go to court but the employee cannot). Success on these challenges varies significantly by jurisdiction. Some courts scrutinize arbitration agreements aggressively; others enforce them broadly. The current federal judicial posture, shaped by a strong Supreme Court preference for arbitration under the FAA, makes challenges difficult.

Strategic Considerations

Workers who find themselves bound by an arbitration agreement should understand what they retain. EEOC charge rights are intact. Sexual harassment claims may be court-eligible under the 2022 Act. State agency rights may not be covered depending on the agreement's language. And the arbitration itself, while not a jury trial, is still an adversarial proceeding where evidence, witnesses, and legal arguments matter — having experienced employment counsel in arbitration is as important as in court.

Key takeaways

What an Arbitration Agreement Does
What Arbitration Agreements Can't Cover
Grounds to Challenge Enforceability
Strategic Considerations

Citations

Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018) — Cited authority
Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2022, 9 U.S.C. §§ 401-402 — Cited authority
Federal Arbitration Act, 9 U.S.C. § 1 et seq — Cited authority

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