When an employee signs a mandatory arbitration agreement on their first day, most of them don't read it. But that agreement often controls how every future dispute between them and their employer will be handled, from wage claims to discrimination allegations. Arbitration moves disputes out of public court and into a private proceeding with limited appeal rights. It's faster and cheaper for employers, which is why it's so common. For employees, whether it's fair depends entirely on how the agreement is structured and which claims it covers.
How Workplace Arbitration Actually Works The process starts when one party (usually the employee) files a claim with the arbitration provider named in the agreement, typically the American Arbitration Association (AAA) or JAMS. Both sides select an arbitrator from a roster, exchange limited discovery, and present evidence at a hearing. The arbitrator issues a written decision, and that decision is generally binding and hard to overturn on appeal.
Compared to court, arbitration has compressed timelines (often 6-12 months vs. 2-3+ years), limited discovery, and no jury. The arbitrator is usually a retired judge or experienced employment attorney. Filing fees are split or borne by the employer, depending on the agreement. Confidentiality is a defining feature: proceedings and outcomes are typically private.
What the Ending Forced Arbitration Act Changed The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act , signed in March 2022, voided mandatory pre-dispute arbitration clauses for sexual assault and sexual harassment claims. Employees who experience either can now choose whether to arbitrate or go to court, regardless of what they signed at hire. The law applies to claims that arose on or after March 3, 2022.
Does Arbitration Cover Class Actions? Most mandatory arbitration agreements include class action waivers, requiring employees to bring claims individually. The Supreme Court's 2018 Epic Systems decision upheld these waivers under the Federal Arbitration Act, though state-level challenges continue.
How Arbitration Interacts With Internal Investigations Arbitration doesn't replace the internal complaint process; it usually follows it. When an employee reports harassment or retaliation , the employer is still obligated to investigate and remediate. Arbitration only comes into play if the employee then pursues formal legal action. A strong internal investigations management process resolves most complaints long before they get anywhere near an arbitrator.
The investigation record matters in arbitration too. Arbitrators routinely review how the employer responded to the initial complaint, whether the investigation was thorough and timely, and what remedial action followed. A clean, documented investigation process strengthens the employer's position regardless of forum.
Making Workplace Arbitration Actually Fair Arbitration has a fairness problem in research: employees win at lower rates than in court and recover less when they do. Employers serious about fairness can take concrete steps. Cover employee filing fees in full. Allow reasonable discovery. Let employees choose the arbitrator from an independent panel. Don't impose confidentiality on the employee's ability to discuss their own experience.
The upstream fix is reducing how often disputes reach arbitration in the first place. That means making it safe to raise concerns internally through anonymous reporting , investigating fast and fairly, and closing the loop with the reporter. An employee relations function that resolves concerns on its own rarely sees them escalate to legal proceedings. Arbitration is the endpoint of a process that should have worked earlier.
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