Arbitration agreements in the employment law context are very common. Arbitration is a form of alternative dispute resolution.  Arbitration agreements in the employment law context are significant because they establish a framework for resolving disputes between employers and employees outside of the courtroom. These agreements typically require both parties to settle disputes, such as issues related to discrimination, wage disputes, harassment, or wrongful termination, through arbitration rather than going through litigation in a public court system.  An arbitrator is a neutral third party who makes decisions based on the evidence presented. This can be more appealing than a trial where a jury or judge might be influenced by outside factors. Employers may view arbitration as less risky than a jury trial, where outcomes can be unpredictable.

However,  the implications of an arbitration agreement in place may pose a thorn for some and not so much for others. By way of example, one of the most common questions received in consultations regarding arbitration agreements is whether or not the agreement precludes an employee from engaging in the administrative process. The answer is no. So if you have an employment discrimination or retaliation claim, you are still permitted to seek engagement with the applicable governmental agency, specifically the Equal Employment Opportunity Commission or the Department of Labor where applicable. Additionally, there are other considerations of an arbitration agreement which employees should keep in mind.  Arbitration typically involves fewer procedural complexities than court trials, as it often lacks the formal rules of procedure and evidence that govern court cases. This can make the process easier to navigate, especially for employees without extensive legal knowledge. 

The enforceability of arbitration agreements has been subject to significant legal scrutiny. Courts, particularly in the U.S., have generally upheld the enforceability of arbitration clauses in employment contracts, but there have been some limits placed on these agreements. For example, some forms of arbitration clauses may not be enforceable if they are deemed to be too one-sided or unfair to the employee.  Arbitration agreements can limit employees’ access to the court system, which raises concerns about transparency and fairness. Critics argue that mandatory arbitration can take away the employee’s right to have their case heard in a public courtroom and to have access to a jury of their peers. In arbitration, employees may be limited in the types of remedies available, and the decisions made by the arbitrator are typically final and binding. This reduces the opportunity for appealing an unfavorable decision. Additionally, arbitrators may not have the same authority as a court to award large punitive damages or broad injunctive relief.

In conclusion, arbitration agreements in employment law are a double-edged sword, providing efficiency and privacy but also raising concerns about fairness, bias, and employee rights. The significance of these agreements largely depends on how they are structured and whether they balance the interests of both employees and employers.

If you are subject to an arbitration agreement and have questions, please contact an employment law attorney who will be able to guide you in addressing the pitfalls and obstacles.