Alternative Dispute Resolution (ADR): What It Means for Employers

What it means in practice

ADR is a family of methods, not one law. Negotiation is direct bargaining between the parties, often ending in a written settlement. In mediation, which the EEOC describes as informal and confidential, the mediator does not decide who is right or wrong and has no authority to impose a settlement. In arbitration, the arbitrator hears the dispute and issues an award that is usually binding. A key distinction is timing: federal law defines a "predispute arbitration agreement" as an agreement to arbitrate a dispute that had not yet arisen when the agreement was made (9 U.S.C. 401), such as an arbitration clause signed at hiring. This entry covers the federal baseline.

How EEOC mediation works. Shortly after a charge is filed, the EEOC may ask both sides whether they want to mediate. Participation is strictly voluntary, and either party may request mediation without an offer. The EEOC screens each charge, considering the nature of the case, the relationship of the parties, its size and complexity and the relief sought; charges it has found to be without merit are not eligible. Mediators are EEOC staff or contract mediators trained in mediation and EEO law. Since 2002, mediation has also been available in appropriate cases at the conciliation stage, after a finding of discrimination, with the EEOC sitting as a participant.

What employers should expect. The EEOC says a session usually lasts 3 to 4 hours, with no fee for either party. A mediated charge takes less than 3 months on average to resolve, compared with 10 months or longer for an investigation. The employer's representative should know the facts and have authority to settle; attorneys are optional, and the mediator decides their role. Everyone signs a confidentiality agreement, sessions are not recorded or transcribed, mediator notes are destroyed, and nothing said can be used in a later investigation. A signed agreement is enforceable in court like any other settlement, and the EEOC says almost half of mediated settlements involve a non-monetary benefit.

The EEOC's ADR principles and results. The EEOC piloted mediation in four field offices in 1991, adopted an ADR policy statement in 1995 and fully implemented its program in April 1999. The 1995 statement requires any EEOC ADR program to be voluntary, neutral, confidential and enforceable, and says ADR must be voluntary because "a federal forum" must "always be available to an aggrieved individual." In FY 2025, 96% of surveyed participants (99% of employers and 92% of charging parties) said they would use the program again. Employers can also sign a Universal Agreement to Mediate, an agreement with the EEOC to mediate all eligible charges; either party can still opt out of a given charge, and class and systemic charges, GINA charges and charges filed only under the Equal Pay Act are not eligible.

The Federal Arbitration Act. The FAA (9 U.S.C. 1-16) makes a written arbitration provision in a contract involving commerce enforceable unless an ordinary contract defense, such as fraud or duress, applies. A court must stay a lawsuit on an arbitrable issue when a party asks (section 3), and the Supreme Court held in Smith v. Spizzirri (2024) that the court may not dismiss instead. A party may ask a court to compel arbitration (section 4). If the agreement provides for a court judgment, a party may apply to confirm an award within one year (section 9); a court may vacate an award only on grounds listed in section 10, such as fraud or evident partiality, and notice of a motion to vacate must be served within three months after the award is filed or delivered (section 12).

The transportation worker exemption. Section 1 excludes "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." In Circuit City Stores v. Adams (2001), the Supreme Court held that the exemption is limited to transportation workers, so most other employment arbitration agreements are covered. In Southwest Airlines v. Saxon (2022), it held that airplane cargo loaders are exempt because the test is the work the employee frequently does, not the employer's industry. In Bissonnette v. LePage Bakeries (2024), it held that a transportation worker need not work in the transportation industry to be exempt. An exempt worker's employment contract falls outside the FAA's coverage.

Class and collective action waivers. In Epic Systems Corp. v. Lewis (2018), the Supreme Court held that the FAA requires courts to enforce agreements providing for individualized arbitration, and that neither the FAA's saving clause nor the National Labor Relations Act suggests otherwise. The case involved wage claims under the Fair Labor Standards Act, where workers sought to bring overtime claims together. The 2022 law below creates an exception for sexual harassment and sexual assault cases.

The EEOC's position on mandatory arbitration. In 1997, the EEOC adopted a Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment. It has since rescinded that statement, saying later Supreme Court rulings conflict with it and that it "does not reflect current law." The rescission also states that the EEOC remains fully available to employees regardless of any arbitration agreement, and that nothing in it limits anyone's ability to challenge whether a particular agreement is enforceable.

Arbitration does not bar the EEOC. In Gilmer v. Interstate/Johnson Lane (1991), the Supreme Court said an employee bound to arbitrate an age claim is still free to file an EEOC charge. In EEOC v. Waffle House (2002), it held that an employer-employee arbitration agreement does not bar the EEOC from seeking victim-specific relief, such as back pay, reinstatement and damages, in its own enforcement action. When the 2022 law below was signed, the EEOC stated that it cannot be forced into arbitration and is not bound by class action waivers. Charges under laws such as the Civil Rights Act of 1964 therefore remain possible even where every employee signed an arbitration agreement.

The Ending Forced Arbitration Act. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (Pub. L. 117-90) was signed on March 3, 2022, and added 9 U.S.C. 401-402. At the election of the person alleging sexual harassment or sexual assault, or the named representative of a class or collective action, no predispute arbitration agreement or predispute joint-action waiver is valid or enforceable for a case under federal, tribal or state law that relates to the dispute. A court, not an arbitrator, decides whether the law applies, even if the agreement tries to delegate that question. It applies to disputes or claims that arise or accrue on or after March 3, 2022, and reaches only predispute agreements and waivers, meaning those made before the dispute arose.

Union workplaces and FMCS. A collective bargaining agreement can require arbitration of statutory discrimination claims if it does so "clearly and unmistakably" (14 Penn Plaza v. Pyett, 2009, as summarized by the EEOC). The Federal Mediation and Conciliation Service (FMCS), an independent federal agency, offers collective bargaining mediation, grievance mediation and arbitration services to employers and unions. It keeps a roster of approximately 1,000 arbitrators but does not issue decisions, and its arbitrators are not FMCS employees. FMCS charges for arbitrator panels; check its arbitration page for current fees. Use of FMCS services is subject to its terms in 29 CFR 1406.1.

Negotiated settlements and releases. Most ADR ends in a settlement that releases claims. For age claims, the Older Workers Benefit Protection Act sets minimum terms (29 CFR 1625.22). A release must be in writing and in plain language, refer to the Age Discrimination in Employment Act by name, advise the employee in writing to consult an attorney, cover no future claims and give something of value beyond what the employee is already owed. Outside a charge or lawsuit, the employee gets at least 21 days to consider (45 for a group program) and 7 days to revoke. Settling an EEOC charge or lawsuit requires a "reasonable period," and the 21 and 7 day periods count as reasonable. No waiver may bar filing an EEOC charge or taking part in an EEOC investigation.

ADR in Department of Labor proceedings. DOL's Office of Administrative Law Judges can appoint a settlement judge on joint request, or on referral when no party objects; talks are confidential and generally must finish within 60 days (29 CFR 18.13). Some whistleblower cases need government approval to settle: under the Sarbanes-Oxley rules, OSHA must approve a settlement during the investigation, and an administrative law judge or the Administrative Review Board must approve one after objections are filed (29 CFR 1980.111). Federal agencies must also make an ADR program available to their own employees for EEO complaints (29 CFR 1614.102).

Deadlines keep running. The EEOC says its 180-day charge deadline, extended to 300 days where a state or local agency enforces a similar law, generally is not extended while someone tries an internal grievance, a union grievance, arbitration or mediation, and those processes can run alongside the charge. ADR timelines and agency deadlines need to be tracked separately; retaliation deadlines under other laws run on their own clocks.

Worked example: a deadline during internal mediation. An employee fired on February 2, 2026 agrees to internal mediation. Day 180 is Saturday, August 1, 2026, so the deadline moves to Monday, August 3, 2026, whether or not mediation is still under way.

Worked example: an age release. An employer gives a 58-year-old employee a final severance offer on Monday, March 2, 2026. The 21-day period runs to March 23. If the employee signs on March 10, the 7-day revocation period runs through March 17, and the agreement cannot take effect before it expires.

Worked example: harassment and an arbitration clause. An employee who signed an arbitration agreement at hiring in 2020 alleges sexual harassment in 2025. Because the dispute arose after March 3, 2022, the employee may elect to sue in court, and the employer cannot require individual arbitration of that case.

Where states differ. As one example, California's Assembly Bill 51 (Labor Code section 432.6) made it a misdemeanor to require applicants or employees to agree to arbitrate certain claims as a condition of employment. In Chamber of Commerce v. Bonta (February 15, 2023), the Ninth Circuit held that the FAA preempts AB 51. On January 2, 2024, a federal court permanently enjoined California from enforcing Labor Code 432.6(a)-(c), and the related Government Code 12953, where the alleged violation is entering into an FAA-covered arbitration agreement. Other states have their own rules, so check your state labor department or legislature; see California labor laws for that state.

FAQ: Can an employer require arbitration as a condition of employment? Under federal law, generally yes for workers covered by the FAA, subject to the transportation worker exemption, the sexual harassment and assault exception and ordinary contract defenses. If an arbitration policy appears in the employee handbook, the EEOC charge process and the exceptions above still apply; check state law as well.

FAQ: Can a settlement stop an employee from filing an EEOC charge? For age claims, no: the EEOC's rule says no waiver may prohibit filing a charge or participating in an EEOC investigation, or impose a penalty for doing so (29 CFR 1625.22). Settling or ending an at-will relationship does not change that.

FAQ: Must an employer agree to EEOC mediation? No. Both parties must agree; if either declines, the charge is investigated like any other.

FAQ: Do ADR agreements interact with other contracts? They can. Settlement agreements may include confidentiality terms, covered under NDA, and restrictive covenants such as a non-compete agreement may contain their own dispute clauses.

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