Arbitration is preferred by many employers as an alternative to litigation for resolving disputes with employees. Arbitration often has the benefit of being less expensive, less time-consuming, less formal, and less public than litigation. Consequently, some employers believe it is advantageous to include mandatory arbitration clauses in employment contracts that require that disputes arising from the employment relationship be resolved through an arbitration process (heard by a neutral third-party) rather than by a court process (heard by a judge and/or jury).

For a number of years, the trend has been for courts to enforce arbitration agreements that contractually require employment disputes to be arbitrated. However, there is one very significant issue in this area of the law that has not yet been fully resolved by the courts - namely, whether "class waivers" in arbitration agreements will be enforced. These types of waivers preclude employees from pursuing class and collective actions in either court or arbitration and enable employees to pursue individual claims only through arbitration. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the U.S. Supreme Court upheld a class arbitration waiver contained in a consumer contract. Since that time, trial and appellate courts across the country (but not yet the Supreme Court) have examined various challenges to arbitration class waivers contained in employment contracts, with mixed rulings. Until the Supreme Court more clearly delineates the law in this area, employers' ability to successfully preclude class and collective actions via arbitration agreements may depend on which jurisdiction they are in.

In the meantime, employers that have existing arbitration agreements in place or that are considering using such agreements should consult their labor and employment counsel to ensure that their arbitration agreements are crafted in a manner that is consistent with the business needs of the company and the law of their jurisdiction.