What Is an Arbitration Agreement?

In the employment context, an arbitration agreement is an agreement between you and your employer to resolve your disputes in a private, arbitral forum as opposed to in Court.

There are various and major differences between having your case proceed in arbitration and in court. In court, you have the right to a jury for many actions while, in arbitration, your matter will be adjudicated merely by an arbitrator (or a private judge). In addition, most often, when you and your employer agree to arbitrate your disputes instead of going to court, you are giving up your right to bring or participate in class and collective actions.

Obviously, giving up any rights, including bringing and participating in class actions, is not in employees’ favor. Moreover, your right to have your case decided by a jury of your peers can be very detrimental to your case. One can argue that a jury of your peers are more likely to understand the everyday toils of working people than former judges.

Moreover, the incentives for an arbitrator are problematic. A large corporation is likely to get sued many times while you are likely to bring a lawsuit a few times, if ever, in your life. The arbitrator only gets paid if the Parties mutually agree to use the arbitrator. Thus, they have an incentive to cater to big corporations so they can earn repeat business. They do not have the same incentive to cater to employees who are unlikely to come back.

The short answer is that being forced by your employer to sign an arbitration agreement does not automatically make the contract invalid.