Mandatory Arbitration Agreements in Pennsylvania: Your Rights

The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., provides the primary framework governing arbitration agreements in employment cases nationwide. Under the FAA, arbitration agreements are generally enforceable 'save upon such grounds as exist at law or in equity for the revocation of any contract.' This means arbitration clauses receive the same treatment as other contracts—they can be challenged on grounds of unconscionability, fraud, duress, lack of mutual assent, or other contract defenses.

The U.S. Supreme Court has consistently held that arbitration agreements in employment contexts are enforceable and that employees cannot be required to litigate in court if they have agreed to arbitrate (AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018)). The FAA applies to all employers engaged in interstate commerce. Remedies available under arbitration are typically identical to those available in court—damages, injunctive relief, and statutory remedies—but the arbitration process itself is private, faster, and subject to limited appellate review.

The Equal Employment Opportunity Commission (EEOC) enforces federal anti-discrimination laws but cannot block arbitration agreements. However, the EEOC retains the right to sue on behalf of employees even when a valid arbitration agreement exists (EEOC v. Waffle House, Inc., 534 U.S. 279 (2002)). Individual employees can still pursue administrative remedies or file EEOC charges even if they have signed an arbitration agreement, though the ultimate dispute resolution may be arbitration rather than litigation.

Pennsylvania adopts and enforces arbitration agreements under both the Federal Arbitration Act and the Pennsylvania Uniform Arbitration Act (PUAA), 42 Pa.C.S. § 7301 et seq. Pennsylvania courts follow the federal pro-arbitration policy but apply Pennsylvania contract law principles to determine whether an agreement is valid, including whether it is conspicuous, mutual, and not unconscionable.

Under Pennsylvania law, an arbitration agreement will be enforced if (1) there is mutual assent to arbitrate, (2) the agreement is in writing or evidenced by written confirmation, (3) the terms are not unconscionable, and (4) the agreement does not violate public policy. Pennsylvania recognizes both procedural unconscionability (whether the agreement was presented fairly and with adequate notice) and substantive unconscionability (whether the terms themselves are unreasonably favorable to one party).

Pennsylvania's Wage Payment Law, 43 Pa. Stat. § 260 et seq., protects employees' right to collect earned wages, but courts have generally permitted arbitration of wage disputes so long as the arbitration agreement does not eliminate or substantially undermine statutory protections. However, if an arbitration agreement prevents an employee from recovering liquidated damages, penalties, or attorney's fees that would be available in court under the Wage Payment Law, Pennsylvania courts may refuse to enforce the clause as applied to wage claims.

Pennsylvania does not carve out statutory rights from arbitration as broadly as some states (e.g., California). Most statutory claims, including discrimination claims under the Pennsylvania Human Relations Act (PHRA), 43 Pa. Stat. § 951 et seq., are arbitrable. However, if an arbitration agreement requires an employee to pay prohibitive costs or arbitrator fees, or imposes secrecy provisions that conflict with statutory remedies, Pennsylvania courts may find the agreement unenforceable as applied to those claims.

Employers in Pennsylvania are covered by these arbitration rules regardless of size if they are engaged in commerce. Employees have the right to challenge an arbitration agreement through a motion to compel arbitration hearing, where the employer bears the burden of proving the agreement is valid and enforceable. The employee can argue unconscionability, lack of mutual assent, or violation of public policy.

Pennsylvania recognizes several important exceptions and limitations to arbitration agreement enforceability. First, an arbitration agreement will not be enforced if it is unconscionable—either procedurally (the employee had no meaningful choice in agreeing) or substantively (the terms are unreasonably favorable to the employer). A one-sided agreement that exempts the employer from arbitration while binding the employee, or that imposes severe cost-shifting on the employee, may be unconscionable.

Second, Pennsylvania does not enforce arbitration agreements that lack mutuality of obligation. If an employer reserves the right to modify or terminate the arbitration agreement unilaterally but the employee cannot, the agreement may be void for lack of mutuality. Similarly, if an arbitration agreement contains a waiver of the right to bring a class action or representative claim, and that waiver itself violates Pennsylvania law, the clause may be severed or the entire agreement may be unenforceable.

Third, arbitration agreements that require payment of arbitrator fees or costs so high that they effectively prevent an employee from vindicating statutory rights may be unenforceable. If the agreement does not clearly allocate costs and the employee would bear unreasonable expenses, Pennsylvania courts may refuse enforcement.

Fourth, certain union members covered by collective bargaining agreements may have protections against mandatory individual arbitration, depending on the terms of the collective agreement and whether the union has negotiated different dispute resolution procedures.

Fifth, agreements that are not presented conspicuously or that contain hidden arbitration clauses buried in dense employment contracts may fail on grounds of lack of assent or procedural unconscionability. Pennsylvania requires that arbitration clauses be clear and prominent so employees understand they are waiving the right to sue in court.

Sixth, arbitration agreements signed under duress—such as when presented as a condition of employment on the first day without opportunity to review or negotiate—may be challenged, though Pennsylvania courts have generally upheld such agreements if the employee had reasonable notice.

Step 1 – Document and Preserve Evidence: If you are asked to sign an arbitration agreement, keep a copy of the agreement itself, any cover letter or email transmitting it, and any explanatory materials provided. Document the date and circumstances under which you received it (e.g., first day of employment, email, in person). If you refused to sign or objected, document your objection in writing via email to your employer or HR department. Save all communications, including any response from the employer. Keep records of any dispute or claim that arises later, including dates, witnesses, and details of what occurred.

Step 2 – Raise Your Objection Internally: Before filing a charge or lawsuit, send a written email or letter to your employer's HR or legal department objecting to the arbitration agreement. State clearly that you do not consent to arbitration and preserve your right to pursue claims through court or administrative channels. Request a written response explaining whether the employer will accept your objection. This creates a paper trail and may help establish lack of mutual assent. Save all responses. If your employer insists on arbitration or terminates you for refusing to sign, this becomes part of your evidence.

Step 3 – File a Charge with the EEOC or Pennsylvania Human Relations Commission (PHRC): If your dispute involves discrimination, harassment, or retaliation based on a protected characteristic (race, color, religion, sex, national origin, age, disability, sexual orientation under Pennsylvania law), file a charge with both the EEOC (for federal claims) and the PHRC (for state claims). The EEOC accepts charges at any time but you must file within 180 days under federal law; Pennsylvania permits 180 days as well in non-deferral jurisdictions. File online at www.eeoc.gov or by mail to the Philadelphia District Office at 1601 Market Street, Philadelphia, PA 19103. The PHRC accepts charges at any time. The charge need not mention the arbitration agreement; simply describe the underlying discrimination or retaliation claim. Reference the arbitration agreement when discussing your dispute but focus on the substantive claim. Neither the EEOC nor PHRC will enforce an arbitration agreement against you; the agency will investigate independently.

Step 4 – Understand the Investigation Process: After you file a charge, the EEOC will send a notice to your employer. The EEOC may conduct an investigation, which typically takes 60–180 days, though it can be longer. The EEOC will interview you and your employer, request documents, and determine whether there is reasonable cause to believe discrimination occurred. If the employer raises the arbitration agreement as a defense, the EEOC will proceed with its investigation regardless; the EEOC is not bound by arbitration agreements. During this time, your employer may file a motion in court to compel arbitration if you have simultaneously filed a civil lawsuit. A court will hold a hearing to determine whether the arbitration agreement is valid and enforceable. You will have an opportunity to argue that the agreement is unconscionable, lacked mutual assent, was presented under duress, or violates Pennsylvania public policy. The court decision on arbitration enforceability typically comes within 30–60 days of the hearing.

Step 5 – Consult an Employment Attorney: Before proceeding further, contact an employment law attorney licensed in Pennsylvania who specializes in arbitration and employment disputes. An attorney can review your specific arbitration agreement and advise whether it is likely enforceable under Pennsylvania law. If you believe the agreement is unconscionable, you should have an attorney argue this in a motion hearing. An attorney can also coordinate your EEOC charge with any court challenge to arbitration. If arbitration is found enforceable, an attorney will represent you in the arbitration proceeding itself. If you cannot afford an attorney, contact legal aid organizations in your county or the Pennsylvania Bar Association Lawyer Referral Service.