Arbitration Clause

An arbitration clause requires that any dispute between you and the other party be decided by a private arbitrator — not a judge or jury in open court. Arbitration is typically faster and cheaper than litigation, but the tradeoffs are significant: arbitrators are often selected from lists maintained by companies that work repeatedly with large corporations, which can create bias. You generally cannot appeal an arbitration decision even if the arbitrator made a legal error. Class action waivers — almost always bundled with arbitration clauses — mean that if the other party wrongs thousands of people for small amounts, no one can join together to hold them accountable. The Federal Arbitration Act makes these clauses very difficult to challenge in most states. California has some of the strongest consumer protections, including requirements that employers pay arbitration costs.

Ask to remove the class action waiver. If you can't, request a carve-out allowing small claims court for disputes under $10,000. In employment contracts, ask who pays arbitration fees — under California law, employers must pay. Consult an employment attorney before signing any arbitration agreement that covers wage or discrimination claims.