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Why Do Employers Like Mandatory Arbitration Agreements?

Mandatory arbitration agreements have become more common in the past few years, with some employers requiring them of every employee that works for them. These agreements, while poorly understood, can have a substantial impact on an employee’s ability to exercise their legal rights. But why do employers like mandatory arbitration agreements, and why do they put them into employment contracts?


What Are Mandatory Arbitration Agreements?

Put in simple terms, mandatory arbitration agreements (also known simply as arbitration agreements or arbitration clauses) are a type of contract that requires both parties to settle any civil claims between them in a private arbitration hearing, instead of going in front of a court. These agreements can be signed as separate contracts, or they can be incorporated as a clause into a larger agreement, such as an employment contract. While employees can choose not to sign these agreements, employers can condition employment on signing one of these contracts.

What Are the Effects of a Mandatory Arbitration Agreement?

When you sign a mandatory arbitration agreement as part of an employment contract, you give up your ability to sue your employer if they violate your contract, discriminate against you, or otherwise violate your rights under the law. Instead, you will face your employer in front of an arbitrator, a private judge who will hear your case and make a decision based on their own judgment. Once an arbiter has made their decision, their judgment is considered final and legally binding on both parties.

Why Do Employers Use Mandatory Arbitration Agreements?

Employers like to use mandatory arbitration agreements for three primary reasons. First, arbitration is far cheaper and faster than litigating a lawsuit in court. Second, arbitrators are private businesses that rely on regular customers to support themselves, and they are often considered more favorable to employers than the courts are. And finally, it keeps employees from being able to establish legal precedent in the court, which may further harm an employer’s interests.

What Can You Do if You Are Forced to Sign a Mandatory Arbitration Agreement?

If you are forced to sign a mandatory arbitration agreement as part of your employment, you can choose to simply not sign it and accept the consequences. However, you may be able to negotiate your contract with the assistance of an employment law attorney. They can help you go over your contract and make sure your rights are fully respected, including your right to pursue justice in the courts.

Steven Mitchell Sack, the Employee’s Lawyer, is a New York employment lawyer with more than 41 years’ experience handling the many aspects of employment law. His new book, “Fired!: Protect Your Rights & FIGHT BACK If You’re Terminated, Laid Off, Downsized, Restructured, Forced to Resign or Quit,” is available in hardback, and contains valuable advice on dealing with employment and labor law issues. To purchase the book, feel free to contact Steven Sack at 917-371-8000 or visit the website at To inquire about a legal matter, please feel free to contact attorney Steven Sack at 917-371-8000 or

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