Mandatory Arbitration Agreements in Employment Contracts

Mandatory Arbitration is a contract clause that prevents a conflict from going to a judicial court.  Between employee and employer, this means that any conflict must be solved through arbitration.  In this process, neutral arbiters review the evidence presented, then they decide the outcome, and how much money is owed (if any), also known as the arbitration award.

For employers, arbitration is usually preferable, because it is less expensive than having the conflict go to court. Many employers include an arbitration clause in their Employment Agreements or as a separate Arbitration Agreement.

If applicable, employees should read and understand the outline of the mandatory arbitration agreement in their Employment Agreement.  Note that the contract cannot prevent an employee from submitting claims to prosecutorial agencies, like the U.S. Equal Employment Opportunity Commission.  However, it can restrict employees from submitting a claim to an administrative agency, such as the state’s Labor Commissioner.

Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.