Mandatory Arbitration Agreements in NJ: What Changed in 2025

The onboarding packet’s become a ubiquitous expectation for every new hire, rife with legal documents signed without really reading or understanding. Mandatory arbitration agreements are often included in these packets and skipped over as a formality. But in New Jersey, these clauses were supposed to have been voided for discrimination and harassment claims in 2019.

It’s been a while since then, and courts have mostly ignored that law in the meantime. But in December 2025, a new ruling changed the game.

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What a Mandatory Arbitration Agreement Does

Signing a mandatory arbitration agreement means giving up your right to sue your employer in court. A private arbitrator decides your case instead of a judge or jury. There’s usually no public record of the outcome. Appeals are rare. Even when the arbitrator gets the law wrong, reversing it is hard.

Employers like arbitration because it usually remains private, moves faster than actual court, and often produces smaller awards. All points favor the employer more than the employee, and workers have been pushing back for decades.

Why New Jersey’s Ban on Arbitration Never Really Worked

In 2019, New Jersey changed the Law Against Discrimination. The change voided any employment contract clause that waives a discrimination, retaliation, or harassment claim.

On paper, that killed mandatory arbitration for these claims statewide. In practice, it didn’t. The federal Arbitration Act protects arbitration clauses from state laws that single them out. In 2022, the New Jersey Appellate Division showed exactly that in Antonucci v. Curvature Newco. An arbitration agreement signed after the state ban still won because federal law overrides it.

This isn’t the only way an arbitration clause can fail, though. Some get struck down for reasons that have nothing to do with New Jersey’s ban.

Guc v. Raymours Furniture Co., decided the same year, tossed an entire agreement over a single buried clause that tried to shorten the two-year deadline for filing an LAD claim.

The One Claim Type Where New Jersey’s Ban Now Works

Sexual assault and sexual harassment claims are the exception. In March 2022, Congress passed a federal law that turned this on its head. It lets an employee void a mandatory arbitration agreement for a sexual harassment or sexual assault claim, giving said employee the power of choice.

That federal change altered New Jersey’s preemption problem. In Sellino v. Galiher (2022), an Essex County judge concluded that once the federal carve-out applied, federal preemption no longer blocked New Jersey’s arbitration ban for the covered harassment claim.

For claims arising after March 3, 2022, that gave the state rule room to operate alongside the federal law.

The 2026 Rutgers ruling pushed the same procedural-fairness issue into union contracts. The New Jersey Supreme Court held that a union couldn’t lock a harassment victim out of her own case either. Different mechanism, same direction.

A December 2025 Ruling Widened the Carve-Out

Most employment lawsuits aren’t one claim. They’re several, bundled together, arising from the same set of facts. That begs the question: if a harassment claim stays in court, does the rest of the case stay with it or get sent to arbitration?

New Jersey’s Appellate Division answered that question on December 26, 2025. The ruling came in two consolidated cases: McDermott v. Guaranteed Rate, Inc. and Rivera-Santana v. CJF Shipping, LLC.

If a lawsuit includes a plausible sexual harassment claim, the entire case stays out of arbitration. That includes wage claims, retaliation claims, and anything else bundled alongside it. Courts can no longer split a case in two.

What You Give Up When You Sign a Mandatory Arbitration Agreement

Outside that one carve-out, signing still means real trade-offs. You typically can’t join a class action with coworkers facing the same issue. A 2018 Supreme Court ruling upheld that limit, and it remains the biggest practical difference between arbitration and court.

Discovery is often lighter in arbitration. You may get fewer documents and fewer depositions than a lawsuit would allow.

The arbitrator is often picked from a roster the employer’s own agreement names, not a judge assigned at random. Reviewing the arbitration clause before you sign is the one point where you have real control over any of this.

Can You Get Out of an Arbitration Clause You Already Signed?

If your claim involves sexual harassment or assault, and it arose after March 3, 2022, yes. You can elect to go to court instead. That choice is yours regardless of what the agreement says.

For every other claim type, the clause you signed is probably still enforceable in New Jersey. That holds even if the clause covers discrimination or retaliation claims the state law says it shouldn’t.

Timing plays a real role here too. The steps you take before you leave a job can affect which claims you’re able to bring, and how.

If you’ve already been let go, navigating severance pay and unemployment benefits is the next practical step. Many severance offers bundle a fresh arbitration clause into the release.

Reviewing a severance agreement deserves the same care as the original contract did.

Mandatory Arbitration Agreement FAQs

Can my employer fire me for refusing to sign an arbitration agreement?

In most cases, yes. Refusing to sign is treated as refusing a condition of employment, and New Jersey generally allows that.

Does New Jersey’s 2019 law protect me at all?

Federal law preempts it in nearly every case, so the honest answer is rarely. Sexual harassment and sexual assault claims arising after March 3, 2022, are the exception.

What happens if my lawsuit includes both a harassment claim and other claims?

A December 2025 ruling settled this. A plausible harassment claim now keeps the whole case out of arbitration, not just the harassment part.

Is arbitration always worse for employees?

Not always. Some employees prefer arbitration’s speed and privacy. The trade-off is real either way, and it’s worth understanding before you sign, not after you file a claim.

What Changes Once You’ve Signed

Signing a mandatory arbitration agreement changes who decides your legal claims and how much you can recover if you win. For most disputes in New Jersey, that change sticks despite the state’s 2019 law.

Sexual harassment and sexual assault claims are the clear exception. The cases decided since 2022 have expanded how that exception operates in practice.

Anyone with a pending claim, or a contract still unsigned, should confirm which side of that line they fall on.