Many employers ask new hires to sign a mandatory arbitration agreement: a contract in which the employee agrees to bring any legal disputes with the employer to arbitration, rather than to court.
Find out whether you can refuse to sign such a document, and whether mandatory arbitration agreements are always enforceable.
A mandatory arbitration agreement is a contract in which an employee agrees to resolve any workplace disputes, such as discrimination claims or wrongful termination, through arbitration rather than taking the matter to court.
Arbitration is a legal proceeding that is less formal than a lawsuit. Disputes are heard more quickly, the rules about evidence and testimony are more relaxed, and decisions are made by an arbitrator rather than a judge.
Employers typically want disputes heard in arbitration because they believe employees don't fare as well there. Arbitrators, who are typically retired judges or business people, are thought to be less likely to be swayed by emotion or sympathy than jurors might be, and therefore less likely to award huge damages for things like pain and suffering. Arbitration also costs less than a lawsuit for both sides.
In recent years, the rise of the #MeToo movement has placed mandatory arbitration agreements in the spotlight when it comes to claims involving sexual misconduct.
Several states passed laws prohibiting employers from enforcing such clauses for claims involving sexual harassment or assault. And in 2022, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which barred employers from enforcing these sorts of agreements when dealing with sexual misconduct claims. The law applies to any claims arising on or after March 3, 2022.
You don't have to sign a mandatory arbitration agreement, but the consequences of refusing to sign could be severe.
The idea that an employer could require you to give up your right to use the legal justice system is shocking to many employees. However, courts have almost uniformly upheld an employer's right to ask employees to sign these agreements. And, employers almost certainly have the right to fire, or refuse to hire, an employee who won't sign.
The lone exception (discussed above) is for claims involving sexual misconduct. As of 2022, an employer cannot require you to sign a mandatory arbitration agreement that includes claims involving sexual misconduct. And if you've already signed such an agreement, an employer cannot enforce it against you for sexual harassment or sexual assault claims.
It's also worth noting that courts have sometimes questioned or struck down arbitration agreements that require employees to pick up too much of the cost, limit the damages available, put significant restrictions on the employee's right to present evidence, and so on. These decisions vary from state to state, however.
Your best bet is to schedule a quick consultation with a local employment lawyer, who should be able to quickly review your employer's agreement and tell you whether it will pass legal muster. If it will, your choices are to sign the agreement or to possibly lose your job.