Tailor arbitration clauses carefully, assert arbitration rights early, and vet arbitrators.
Courts rarely overturn awards, so prevention matters.
Arbitration is a mainstay in the global business world—but “set it and forget it” is not a good strategy. True, no one wants to talk about litigation when entering into an important business deal or signing up a key executive.
Lawyers and their clients may be tempted by cut-and-paste provisions that seem “standard” or unproblematic but which may not ultimately suit their needs once a dispute arises.
In this article, we offer some drafting considerations for arbitration clauses, some cautionary tales, and we also set out some points on how to enforce your rights (including where awards may be subject to challenge in court), based on recent developments and our own experience in the evolving world of arbitration.
Before You Sign Up To Arbitrate
There are multiple questions to ponder, up front, before you sign that new deal:
Venue
At the outset, consider carefully which forum you choose. Venue options include the International Court of Arbitration (ICC), the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (AAA), Judicial Arbitration and Mediation Services (JAMS), Arbitration and Mediation Service (AMS), and many others. There are many new market entrants and there is competition for business. Even a cursory review of the various arbitration rules will demonstrate that they are not “one size fits all.”
Class or Consolidated Actions
Class or consolidated actions also require careful consideration in entering into an arbitration agreement. Class arbitration generally requires clear contractual authorization, and some states and fora will not permit it absent explicit consent. (Hint: if banning class or consolidated actions is desired, the agreement should clearly state that.) Separately, both AAA and JAMS introduced revised, but distinct, administrative frameworks in 2024 for handling large volumes of arbitrations. Consider what specific rules are appropriate for your situation and make that choice explicit in the agreement.
Discovery Rules
As all practicing trial lawyers know, discovery is often one of the most significant burdens in litigation and arbitration. Discovery rules vary by provider and should be considered in clause drafting. Want depositions? Generally, you’re not going to see them in FINRA; some fora, like JAMS, allow them, albeit usually in limited fashion.
Want to keep costs low? Some rules provide for limited discovery briefing and expedited decision making on motions to compel. Prevailing party cost and fee entitlement? Consider whether the applicable arbitration rules or the arbitration agreement itself provide (or should provide) for these.
Don’t Go Overboard
Parties should avoid overreaching provisions that may be viewed as unfairly limiting a party’s rights. While arbitration remains a creature of contract, many so-called “one-sided” provisions may not fly (see, e.g., Stoker v. Blue Origin LLC, 120 Cal. App. 5th 91 (2026), where the California Court of Appeal held that a lack of mutuality rendered an arbitration agreement substantively unconscionable; the court noted that the agreement applied to claims likely to be brought by Stoker and created a one-sided exemption from arbitration for claims likely to be initiated by his employer). Nevertheless, a one-sided confidentiality clause might pass muster in the right circumstances (see, e.g., Santana v. Studebaker Health Care Ctr. LLC, 120 Cal. App. 5th 1 (2026), where the same court held that a different agreement did not cross the line. The court concluded that though an employee’s agreement with his employer—an adhesive contract presented on a “take it or leave it” basis—reflected a low level of procedural unconscionability, the agreement did not contain any substantively unconscionable terms).
Consider Timing
Rolling out a new plan? Better to do that before there is litigation. Courts have scrutinized employers who attempt to roll out or invoke arbitration provisions after litigation has commenced. In Cobb v. Ironwood Country Club, 233 Cal.App.4th 960 (2015), defendants appealed from an order denying its motion to compel arbitration; the motion to compel was based on an arbitration provision Ironwood incorporated into its bylaws four months after the plaintiffs’ complaint was filed.
The Court of Appeal affirmed the order, rejecting defendants’ contention that country club members (and former members) are deemed to agree to any amendments made to the bylaws. In Franco v. Greystone Ridge Condominium, 39 Cal.App.5th 221 (2019), however, an employer filed a motion to compel arbitration based on an agreement that employee signed after filing a complaint. The court in that case upheld the agreement, since it governed claims “relating to any aspect of Employee’s employment with Employer (prehire through post-termination.”)
Preserving Your Arbitration Rights
Preserving arbitration rights requires attention to waiver risks and consistent assertion. Courts have been all over the map on what it takes to waive. In Arzate v. ACE Am Ins. Co., 108 Cal. App. 5th 1191 (2025), the court held that an employer’s failure to commence arbitration, even after it won a motion to compel arbitration, was not a waiver of its right to arbitrate, because it was the employees who were required to initiate under the terms of the arbitration agreements.
In Buruk v. Experian Info. Sols., Inc., 732 F. Supp. 3d 165 (D. Mass. 2024), the court found no waiver where the defendant engaged in relatively minimal litigation—participating in settlement discussions but not responding to discovery requests—before moving to compel arbitration.
Other courts have been much less forgiving. Federal courts following Morgan v. Sundance, 596 U.S. 411 (2022), have lowered the bar for finding waiver of arbitration through litigation conduct by eliminating the need to show that a party was prejudiced by the other party’s inconsistent actions.
Eight months after an employee filed a lawsuit, her employer moved to stay the litigation and compel arbitration—although the latter had initially defended the lawsuit as if no agreement existed. Justice Elena Kagan, a unanimous decision, only addressed the prejudice requirement, remanding for the Eighth Circuit to potentially consider whether the employer knowingly relinquished the right to arbitrate by acting inconsistently with that right.
Pro Tip
Assert arbitration rights early and often. Do not take any steps in court that could later be viewed as inconsistent with the right to arbitrate. Here is a non-exclusive list of things to do (or not do):
- raise arbitration in the first possible correspondence with opposing counsel and include a non-waiver of rights at the end of any letter;
- do not answer the complaint without moving to compel arbitration;
- do not seek discovery in the court matter;
- do not seek judicial relief on any topic without being clear that in doing so you preserve your arbitration rights.
Enforcing Your Arbitration Rights
Under AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), arbitration is generally enforceable, but Congress has imposed certain limits. One such limit is the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA), which allows a plaintiff who asserts covered claims to potentially avoid mandatory arbitration, although the scope of that law is hotly disputed.
In Puris v. TikTok Inc., No. 25-322 (2d Cir. filed Feb. 12, 2025), a case that is currently under Second Circuit review, the defendants argue that the EFAA does not apply because the case does not relate to a “sexual harassment dispute.” According to defendants, plaintiff does not allege sexual harassment but retaliation for reporting conduct she calls “sexual harassment.”
Moreover, according to the defendants, even if the court were to find that the EFAA applies to some claims (such as retaliation), the rest of the case must be severed and sent to arbitration.
Recently, however, the Second Circuit held in Diaz Roa v. Hermes Law, No. 24-03223 (2d Cir. Sept. 30, 2026), that defendant employers could not compel enforcement of an arbitration agreement since EFAA allowed the plaintiffs’ lawsuit entire lawsuit (which included sexual harassment allegations) to proceed in court. Diaz Roa will undoubtedly inform the Second Circuit’s decision in Puris.
Another exception to arbitration agreements that has been in the courts recently is the transportation workers exemption in the Federal Arbitration Act (FAA). This exemption excludes certain transportation workers’ employment contracts from the FAA’s mandatory arbitration framework.
This exemption was modestly expanded by the Supreme Court in Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024)—a unanimous decision—to hold that a transportation worker need not necessarily work for a company in the transportation industry to fall with the exemption, as long as they were involved in packaging goods for transportation. As is often the case, however, the court left some questions unanswered.
According to the Supreme Court, while “[t]he Second Circuit erred in compelling arbitration on the basis that petitioners work in the bakery industry[,]” Chief Justice John Roberts wrote for the court, “[w]e express no opinion on any alternative grounds in favor of arbitration raised below, including that petitioners are not transportation workers and that petitioners are not ‘engaged in foreign or interstate commerce’…because they deliver baked goods only in Connecticut.”
Where does this leave the scope of this FAA-based exemption? We cannot say for sure, but it does appear plain that it will not apply broadly to all interstate commerce as interpreted under the Commerce Clause. For now at least, there still needs to be a direct nexus to actual shipment of goods.
What if you arbitrate and receive an erroneous award? While predictability is certainly one of the goals of a properly drafted arbitration clause, erroneous awards do happen. However, as most practitioners know, there are limited avenues to challenge an erroneous arbitration award. That said, courts can and do grant motions to vacate in deserving cases.
For example, in Eletson Holdings v. Levona Holdings, 731 F.Supp.3d 531 (2024), a Canadian hedge fund achieved partial vacature of a JAMS arbitration award on the grounds that the arbitrator erred in ordering nonparties to the arbitration to pay damages, purportedly as alter egos of the hedge fund subsidiary (the court held that modification, not vacature, was the proper remedy).
Another example is Matter of Lerner v. Credit Suisse Sec. (USA) LLC, 193 A.D.3d 649 (2021), where a FINRA award was successfully vacated in part, by the First Department because the award had incorrectly applied wage law protections to a contingent equity compensation award.
In another notable case, NNN Capital Fund I. v. Mikles, 119 Cal.App. 5th 1200 (2026)—after the trial court ordered arbitration and an award was issued—respondents renewed challenges to claimants’ standing, and the appellate court reversed the trial court’s confirmation of the award, remanding for a determination on standing.
The court followed the basic tenet that jurisdiction is never waived and can be raised at any time, including for the first time on appeal; and declined to follow the tenet that an arbitration award can only be challenged on very limited grounds, even if the award is based on an error of law.
Despite the fact that some challenges succeed, however, the reality is that most reported cases enforce arbitration awards. Challenging an arbitration award remains possible, but likely only in the most compelling cases.
Will alleging bias work? Bias is often assumed to be the death knell of an effort to enforce an arbitration award. After all, if the award is infected with bias, how could it be the kind of alternative justice that the parties bargained for?
Whether alleged bias will be a successful basis for vacatur still “depends” on the specifics. In one recent case, Telecom Bus. Solution v. Terra Towers, No. 1:22-cv-01761 (S.D.N.Y. 2025), Judge Lewis A. Kaplan upheld a $300 million arbitration award despite earlier allegations that an arbitrator made public statements about the case that contained bias.
In another case earlier this year, Torres v. Wells Fargo Clearing Servs., 2026 NY Slip Op. 31007 (Sup. Ct., N.Y. County, Mar. 4, 2026), after a FINRA panel issued an award enforcing a promissory note in Wells Fargo’s favor, an employee successfully vacated because the chair had not disclosed that she had liens and judgments against her, including one in favor of Wells Fargo.
The court’s decision in Torres was notable, given that all three arbitrators signed on to the award, meaning that the award would have stood even ignoring the vote of the one arbitrator who had allegedly not made a fulsome disclosure.
Pro Tip
Considering the cases, make sure that each and every issue of concern in an arbitration is reflected in the record—otherwise, you may find yourself stuck with an award that might have been subject to an appropriate challenge, however limited.
This may provide the best available means to preserve limited grounds for challenge. In addition, as a drafting consideration, parties may consider including a pre-emptive strike option in the arbitration clause or agreement.
This is contractual language that proactively limits the arbitrator’s authority and creates conditions that provide grounds for challenging an award if necessary. Examples include requiring written decisions with findings of fact, restricting the arbitrator’s authority to specific issues, prohibiting punitive damages awards, mandating hearing transcripts, or specifying what constitutes “excess of authority.”
By setting these restrictions upfront, you may create additional grounds to challenge an award if they are violated. But before considering such clauses, consult with knowledgeable counsel. There are always risks to consider.
A final note: We have seen the emergence of certain large arbitration awards some of which have roughly kept pace with courts and juries. When considering the potential for large awards and the limited nature of judicial review, the importance of vetting arbitrators cannot be overstated.
Arbitrator selection can significantly impact outcomes. In many if not most cases, they are the judge and the jury combined!
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Ann W. Parks, staff attorney at Epstein Becker Green, contributed to the preparation of this article.
Reprinted with permission from the November 12, 2026 issue of Law.com. © 2026 ALM Global Properties LLC, trading as Centellic. Further duplication without permission is prohibited contact 877-256-2472 or asset-and-logo-licensing@alm.com. All rights reserved.
