Forced Arbitration

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Forced Arbitration

What Is Forced Arbitration?

When conflict arises at a workplace or within an organization, a forced arbitration clause in an employment contract may dictate that the issue be sent to a third-party arbitrator who will determine the outcome. The problem with this process is that it is, as the name suggests, forced. Forced arbitration revokes an employee’s right to take any conflict with an organization to court. 

Organizations will directly send any disputes to the arbitrator, whose decisions and methods are met with little to no oversight and whose final ruling is final. 

The arbitration process involves a neutral party taking testimony, gathering evidence to support the claim, and ultimately reaching a verdict. The process can cost the employer money but can be cheaper than litigation overall. Often, if an individual files a claim and wishes to initiate the process, they are met with fees that can create a significant expense.

In addition, there is no judge, court, or jury to allow for an appeal which limits any recourse for the employee.

What Is the Ending Forced Arbitration Bill?

The bill essentially says that even if an employee signs an arbitration agreement from their employer, they are still eligible to take any sexual harassment or assault claims to the court system. They can go to court, initiate arbitration, or even both if they wish. The purpose of this bill is to end a process that often protects employers from litigation and causes workplace misconduct issues to go underreported. It is important to note that this bill only applies to sexual harassment or assault claims and that any other claims may still be subject to forced arbitration at this time.

What Do Employers Need to Know?

While employees can now take matters to court for qualified grievances, they still have the opportunity to pursue arbitration if they wish. Employers need to be prepared for either of these scenarios from a compliance standpoint.

It is also crucial for employers to remember that some states have already adopted arbitration bans, including New York and California. Many large companies in these states have already ended their arbitration agreements, and your organization must update its policies to cooperate with state and federal laws.

Related Terms: Employee Management

« Back to Glossary Index
Top