Somewhere in your onboarding paperwork, between the tax forms and the direct deposit authorization, there may be a short document or a paragraph in your offer letter that changed your rights. It says that if you ever have a dispute with your employer, you will resolve it through arbitration instead of a court.
Many employees sign these without noticing. They only learn about them when something goes wrong, they hire a lawyer, and the employer files a motion to push the case out of court. The good news is that arbitration agreements are not always enforceable, and New Jersey law has some of the strictest requirements in the country.
What Arbitration Is
Arbitration is a private process in which one or more arbitrators, instead of a judge and jury, decide a dispute. Employers like it for several reasons: it is private, it usually limits discovery, it avoids juries, and it can be quicker or less costly for the company.
For employees, the trade-offs are real. There is generally no jury, the rules on evidence and discovery are looser or narrower, the right to appeal is very limited, and the process is out of public view. Whether those differences hurt or help depends on the case, which is why you should not agree to arbitration without understanding what you are giving up.
Courts Generally Enforce Arbitration Agreements, With Limits
The Federal Arbitration Act reflects a strong policy favoring arbitration, and New Jersey courts will enforce properly drafted agreements, including for claims under statutes like the Law Against Discrimination (LAD). But they scrutinize them closely.
The Atalese rule: the agreement must be clear
In Atalese v. U.S. Legal Services Group, the New Jersey Supreme Court held that an arbitration clause must clearly and unambiguously tell the signer that they are giving up the right to bring a claim in court and to have a jury decide it. New Jersey courts have applied this principle to employment agreements. An appellate decision in 2025 reaffirmed that a clause that does not clearly state the waiver of a court or jury trial may not be enforced, and it held that New Jersey law governed the question even though the agreement chose another state’s law.
If your agreement says only that disputes will be resolved by “final and binding arbitration,” without explaining that you are giving up your right to go to court, it may be vulnerable.
Assent matters
An arbitration agreement is a contract, so the employee must have agreed to it. Courts have found agreement in many ways: a signature, an electronic click, or continued employment after clear notice that continuing means acceptance. Some employers also offer a short opt-out window, such as 30 days. If you missed it, you may be bound. If the employer cannot show you received and accepted the agreement, it may not be enforceable.
The Federal Law on Sexual Harassment Claims
In March 2022, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA). Under it, a person who alleges sexual harassment or sexual assault cannot be forced to arbitrate that dispute under a pre-dispute arbitration agreement if they choose to go to court. The choice belongs to the employee, who can still elect arbitration if they prefer.
In December 2025, a New Jersey appellate decision held that once a lawsuit includes a properly pleaded sexual harassment or sexual assault claim, the entire case, not only the harassment count, stays in court. Trial judges had previously been splitting cases and sending the non-harassment claims to arbitration. If you have both a harassment claim and, for example, a retaliation or wrongful termination claim, that ruling matters.
The EFAA applies to disputes that arose after it was enacted. Cases that began earlier may be treated differently. See our practice page on sexual harassment for more on those claims.
The 2019 New Jersey Law and Its Complications
In 2019, New Jersey amended the LAD to bar contracts that waive substantive or procedural rights in discrimination, retaliation, or harassment claims, which would include a waiver of the right to a jury trial. Many courts concluded that the Federal Arbitration Act overrides that provision for most arbitration agreements, so it has not been a reliable way to avoid arbitration across the board. The EFAA changed that picture for sexual harassment and sexual assault claims. This is an evolving area, and the answer for your case depends on your facts and on the current state of the law, which is why a lawyer’s review matters.
What an Arbitration Clause Does Not Always Do
Even with a valid agreement:
- You can generally still file a charge with an administrative agency such as the New Jersey Division on Civil Rights or the EEOC. Whether and how that interacts with arbitration depends on the agreement and the claim.
- The agreement may not cover every claim. Many clauses are limited to certain claims or exclude others, such as wage claims, workers’ compensation, or unemployment benefits.
- The employer must follow its own agreement. If the process is unfair or the terms are unconscionable, a court may refuse to enforce them.
- Short deadlines in the agreement are not necessarily valid. The New Jersey Supreme Court has held that employers cannot contractually shorten the LAD’s two-year limitations period for a lawsuit, although how that applies to an arbitration is a question for a lawyer.
What to Do If You Are Asked to Sign an Arbitration Agreement
- Read it. Find the words “arbitration,” “jury,” “waive,” and “class action.” Note what claims are covered and who pays the arbitrator’s fees.
- Ask for time. Do not sign on the spot because someone is waiting.
- Look for an opt-out. If there is a window, calendar the deadline.
- Ask whether it is negotiable. Sometimes it is, particularly for senior roles. A lawyer can help with reviewing a job offer or contract before you sign.
- Keep a copy. Employers sometimes cannot locate signed agreements later.
If Your Employer Is Already Seeking Arbitration
If you have filed a claim and your employer says you must arbitrate, do not assume it is correct. Ask a lawyer to evaluate whether the agreement is clear enough under Atalese, whether you actually agreed to it, whether it covers your claims, and whether the EFAA applies. Employers often file motions to compel arbitration, and those motions can be contested. If you are within a deadline for a claim, see how to file a complaint with the EEOC or the NJ Division on Civil Rights, and learn more about how long an employment case takes.
Talk to a New Jersey Employment Lawyer
Whether you are about to sign an arbitration agreement or your employer is trying to enforce one, contact Charles Z. Schalk or call (908) 526-0707 for a free, confidential consultation. Bring the agreement, any related emails, and your onboarding paperwork.
Frequently Asked Questions
Can my employer require me to sign an arbitration agreement as a condition of employment?
Often, yes. Employers can generally make arbitration a condition of hiring or of continued employment, but the agreement must meet legal requirements, including clear language waiving the right to go to court. If it does not, a court may refuse to enforce it.
What is the Atalese rule?
It is the New Jersey Supreme Court’s requirement that an arbitration clause clearly explain that the signer is giving up the right to sue in court and to have a jury decide the case. Vague language about “binding arbitration” may not be enough.
Can I still sue for sexual harassment if I signed an arbitration agreement?
Under the federal EFAA, you can choose to take a sexual harassment or sexual assault dispute to court instead of arbitration, regardless of a pre-dispute agreement. New Jersey’s appellate courts have also held that the rest of the case follows it into court. The details depend on when the dispute arose.
Does an arbitration agreement stop me from filing with the EEOC or Division on Civil Rights?
Generally, no. An arbitration agreement does not usually prevent you from filing an administrative charge, though it can affect what happens to a later lawsuit. Speak with a lawyer about how the two interact and the deadlines you face.
Is arbitration better or worse for employees?
It depends. Arbitration is usually private and may be faster, but you give up a jury, and discovery and appeal rights are limited. For many employees, the loss of a jury is the biggest concern. That is why the decision should be informed.
Can I opt out of an arbitration agreement?
Only if the agreement gives you that right. Some do, with a short window to opt out, such as 30 days after receipt. Check your paperwork right away, and calendar the deadline.
This article is provided for general informational purposes and is not legal advice. Reading it does not create an attorney-client relationship. Arbitration law is evolving, and every situation is different. Prior results do not guarantee a similar outcome.