Employers are often named as defendants in employment related lawsuits. Although some employment cases filed have merit, others do not. Regardless, employers must defend each case until the parties reach a judicial resolution (such as summary judgment or a verdict) or settlement. To achieve the most favorable resolution in a particular case, employers and their counsel must both develop a successful litigation strategy and understand the legal obligations under applicable law.

This Toolkit provides resources to help private employers and their counsel defend against employment discrimination lawsuits, including addressing the substantive legal requirements of state law.

For resources and information about settling employment cases, see Settling Employment Disputes Toolkit and Settling State Law Employment Disputes Toolkit.

Arbitration is often viewed as a more efficient and cost-effective alternative to litigation. Some employers prefer to resolve employment-related disputes by binding arbitration rather than in court and enter into arbitration agreements with their employees.

The US Supreme Court, and most state jurisdictions, have consistently held that arbitration agreements are enforceable in the employment context, even though employees are giving up their right to have their grievances heard in court and determined by a jury (see, for example, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001), and Fletcher v. Kidder, Peabody & Co., 601 N.Y.S.2d 686, 692-93 (1993)). The Supreme Court has also concluded that class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), subject to traditional contract defenses, and do not violate employees' right to engage in protected concerted activity under the National Labor Relations Act (NLRA) (Epic Sys. Corp. v. Lewis, 584 U.S. 497 (2018)).

However, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) now renders unenforceable mandatory predispute arbitration agreements regarding sexual assault or sexual harassment disputes, including claims arising under Title VII or comparable state law, and joint-action waivers regarding those claims, unless it is the claimant's option to arbitrate those claims (9 U.S.C. § 402(a); see also Practice Note, Employment Arbitration Agreements (US): Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021).

Following the Epic Systems decision, many employers revisited their decisions about whether to use arbitration agreements with their employees or revised existing agreements to include class action waivers. Employers similarly reevaluated their arbitration programs given the enactment of the EFAA, which applies to disputes arising on or after March 3, 2022. Employers must understand, however, that there is no one-size-fits-all solution to this issue, and class action waivers still carry risks (see Practice Note, Employment Arbitration Agreements (US): Serial or Mass Individual Arbitrations). They should weigh the potential benefits and risks of arbitration considering various factors, such as the nature of their business, the composition and location of their workforce, and state or local laws that may impact the enforceability of certain arbitration agreements (see Practice Note, Employment Arbitration Agreements (US): Benefits and Drawbacks of Arbitration Versus Court and Sexual Harassment Claims in Settlement, Arbitration, and Other Employment Agreements State Laws Chart: Overview).

This Toolkit offers state-specific resources designed to aid employers and their attorneys in drafting enforceable employment arbitration agreements.

For more about traditional labor arbitration under the NLRA, which is beyond the scope of this resource, see Practice Note, Labor Arbitration and the related content cited in that resource.

For more resources about employment arbitration, see Employment Arbitration Toolkit (US). For more resources about arbitration generally, see US Arbitration Toolkit.