3 Key Takeaways
- If you signed an arbitration agreement as part of your employment, you may have given up your right to sue in court and to join a class action, but there are important exceptions.
- Federal law now gives employees the right to take sexual harassment and sexual assault claims to court, regardless of what any arbitration agreement says.
- New York has tried to limit mandatory arbitration (when your employer requires you to settle disputes privately instead of going to court), but federal law largely overrides those protections for most employees.
That document you signed during onboarding matters more than you think
When you start a new job, you’re handed a stack of paperwork. Offer letters, handbooks, direct deposit forms, and somewhere in the mix, often without much explanation, an arbitration agreement. Most people sign it without a second thought. But understanding what that agreement actually means can be genuinely important if something goes wrong down the road.
What is an arbitration agreement?
An arbitration agreement is a contract in which you agree to resolve any workplace disputes through a private process, rather than in court. Instead of a judge or jury, a private arbitrator hears both sides and makes a decision. This sounds neutral on its surface, but in practice it comes with some significant trade-offs for employees.
By signing one, you typically give up:
- Your right to a jury trial
- Your ability to join a class action or collective lawsuit with coworkers
- Access to the same level of discovery as you’d have in court
- Restricted rights to appeal if the outcome goes against you
Arbitration proceedings are also usually confidential, which can limit public accountability for employers who engage in repeated misconduct.
Why do employers want these agreements?
Arbitration tends to be faster and more private than court litigation, and statistically it tends to produce outcomes more favorable to employers. That’s why these clauses have become so common. Under the Federal Arbitration Act (FAA), courts are required to enforce them in most situations, and the FAA generally overrides state laws that try to limit them.
New York actually passed a law attempting to ban mandatory arbitration for discrimination claims, but federal courts have consistently held that the FAA takes precedence. For most New York employees, that state protection doesn’t offer the shield it was intended to provide.
Sexual assault and sexual harassment are the exceptions
In 2022, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, and it’s one of the most meaningful shifts in employment law in recent years. Under that federal law, if your claim involves sexual harassment or sexual assault, you have the right to bring your case in court, regardless of any arbitration agreement you signed. That choice is yours to make, and a court, not an arbitrator, decides whether the law applies to your situation.
This means that even if you signed away your right to sue over wage issues or other employment disputes, you have not signed away your right to pursue a sexual harassment or assault claim in front of a judge and jury.
Class action waivers and what they mean for wage claims
Many arbitration agreements also include a class action waiver, which means you can only bring a claim individually, not alongside coworkers who experienced the same thing. This is particularly significant in wage and hour cases, where the violation often affects many employees in the same way and the individual amounts at stake may be modest. Courts, including those in New York, have consistently enforced these waivers. If you’re in that situation, an attorney can help you think through what your individual options look like.
What’s on the horizon in New York
It’s worth noting that New York’s legislature recently passed a bill called the Anti-Waiver of Employment Rights Act, which would invalidate contract provisions that strip employees of rights under the Labor Law and Human Rights Law. However, because it includes a carve-out for agreements governed by the federal FAA, arbitration clauses and class action waivers in most employment contracts would likely still be enforceable. The bill’s full impact, and questions about whether it applies to agreements already signed, will almost certainly be tested in court.
To sign or not to sign the arbitration paperwork
In most cases, refusing to sign an arbitration agreement means not getting the job. That’s the reality. But knowing what you’ve agreed to, and knowing where the exceptions are, puts you in a much better position if you ever need to take action.
If you’ve signed an arbitration agreement and aren’t sure what it means for a situation you’re currently facing, reach out to our team at VKV. We’ll help you understand what your options actually are.
