Arbitration agreements require legal disputes to be resolved through arbitration instead of the U.S. court system. Originally, they were used between two business entities that knowingly agreed to handle disputes this way because arbitration is often faster and cheaper than litigation.

However, in recent decades, employers have started using these agreements with employees — often in new hire paperwork — because it protects them from legal liability even if they knowingly violate an employee’s rights. These agreements allow employers to avoid accountability, as employees often don’t realize what they’ve signed until it’s too late.

You will often find mandatory arbitration agreements in new hire paperwork or if you’re laid off or terminated in your severance agreement.

The easiest way to locate if you have one is to open up this paperwork and search for the word arbitration.

It means your employer has preemptively protected itself from being sued in court for any wrong they may do to you during your employment. This could include disputes regarding inaccurate pay, civil rights violations and unsafe working conditions.

If you have a mandatory arbitration agreement you cannot file a lawsuit against your employer in the US court system and all legal disputes must go through arbitration, which I’ll explain in more detail below.

The only current exception is sexual harassment violations as the #MeToo movement resulted in the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA) becoming law in March 2022. As a result, employers can not force sexual assault or sexual harassment cases into arbitration even if a current mandatory arbitration agreement exists between the employer and employee.

Mandatory Arbitration Agreements typically deny the following rights:

A major issue with arbitration is that arbitrators are not federally regulated, and there is no uniform national floor for qualifications or conflict-of-interest rules. Some organizations — like JAMS or the AAA — have relatively rigorous standards, with many arbitrators being retired judges or experienced attorneys. But other arbitration services operate with far less oversight, meaning someone with significantly less training, experience, and accountability than a federal judge can make a legally binding decision about whether your civil rights were violated.

The Ninth Circuit's 2019 ruling in Monster Energy Co. v. City Beverages, LLC is a case study in why this matters. The arbitrator hearing the case was a co-owner of JAMS, as were roughly one-third of all JAMS arbitrators — none of which had been disclosed to City Beverages. More alarming, JAMS had administered 97 arbitrations for Monster in the five years leading up to this case. As a result, the Ninth Circuit vacated the award on grounds of evident partiality — the arbitrators were financially incentivized to keep ruling in Monster's favor as long as Monster kept sending cases to JAMS. (9th Cir. 2019)

The court’s opinion also highlights a deeper structural problem: employers choose which arbitration service to use in their agreements. That gives arbitration organizations a financial incentive to build a track record of ruling in employers’ favor or risk losing that repeat business. And because arbitration proceedings are private, employees rarely have the resources or access to uncover these relationships even after losing their case.

Employers want to avoid class-action lawsuits because they are expensive, attract media attention, and can seriously damage their reputation. Unfortunately, by allowing employers to preemptively shield themselves from the lawsuits they desperately want to avoid, the legal system has also enabled employers to violate workers’ rights on a large scale without accountability.

An example may be the best way to demonstrate this — Imagine a company steals $1,000 from 100,000 employees.

This makes it far harder for employees to fight back. And even if some do win, arbitration is private, so the company avoids both financial risk and public exposure.

First, contact your state and federal representatives. If Congress passed the EFASASHA to protect workers from forced arbitration in sexual harassment cases, there’s no reason that protection can’t be expanded to cover other civil rights violations, including gender discrimination, retaliation, and pay inequity. Legislative change is how workers have won these protections before.

Second, document everything. Whether you end up in arbitration or find a path around it, a strong factual record is your most important asset. Note dates, save communications, and write down what happened while it’s fresh. Courts and arbitrators alike respond to specifics.

Third, get a legal consultation if you can. Many employment attorneys offer free initial consultations and work on contingency — meaning they only get paid if you win. An attorney familiar with your state’s laws may identify grounds to challenge the agreement’s enforceability, or claims (like sexual harassment under EFASASHA) that fall outside it entirely.

Finally, you can file a charge with the EEOC or your state’s civil rights agency regardless of whether you have an arbitration agreement. Filing preserves your rights and creates an official record. In some cases, it can also open a path to court even when a mandatory arbitration agreement exists.