Recent Rulings Reveal Why Employer Arbitration Agreements Sink or Swim

Before a court will send an employment dispute to arbitration, it asks a threshold question: did the parties actually agree to arbitrate?

In Zehaifi v. Bank of America, N.A., a federal district court granted an employer’s motion to compel arbitration after finding that the bank had strong evidence of both notice and acceptance. The decision offers a useful roadmap for employers seeking to build arbitration policies that will withstand enforceability challenges.

How One Employer Built an Enforceable Arbitration Policy

Bank of America distributed its arbitration policy by email to all affected employees. The email used a prominent subject line — “Important: Binding Arbitration Policy” — contained a hyperlink to the full policy, explained that the policy applied to U.S.-based employees, and instructed employees in bold text to read, acknowledge and agree to it. The email also made clear that employees would be bound either by clicking an “Acknowledge and Agree” button in the email or by continuing employment for more than 30 days after receipt.

When challenged by an employee, the court found both notice and acceptance of the arbitration policy were satisfied. On notice, the bank’s electronic records showed that the employee received and opened the email; his statement that he did “not recall” receiving it did not overcome that evidence. On acceptance, the court found two independent grounds for assent: the employee clicked the acknowledgment button and continued working well beyond the 30-day period identified in the policy.

The court also rejected the employee’s argument that the policy was illusory (i.e., one-sided and therefore unenforceable) because the policy permitted the bank to unilaterally modify the terms. The policy allowed the bank to modify its terms only prospectively and only after 30 calendar days’ advance notice to employees. As a result, the bank could not avoid its arbitration commitment by retroactively rewriting the policy terms. That built-in limitation saved the policy.

The court also confirmed that the employee’s claims fell within the policy’s definition of “Covered Claims,” reinforcing the additional need for an arbitration policy to clearly define covered disputes and exclusions.

What Enforceable Arbitration Policies Have in Common

The Zehaifi outcome is not an outlier. Other recent decisions identify the facts courts look for when deciding whether an arbitration policy is enforceable.

For notice, courts look for evidence that the employer clearly communicated the policy. Effective methods include offer letters identifying arbitration as a condition of employment, arbitration-specific training modules, onboarding systems that separately label the policy and require acceptance, and employee emails with prominent subject lines and plain-language explanations.

For acceptance, enforceable policies often include an affirmative employee step — such as a paper or electronic signature, clicked acknowledgment button or checked consent box — supported by time-stamped records and continued employment after notice.

Courts also credit opt-out mechanisms that provide a defined period and clear steps to decline arbitration. If an employee does not opt out and continues working, courts may treat that combination as acceptance.

When Handbook Language Sinks an Arbitration Policy

By contrast, in one cautionary example, the arbitration policy was embedded within a broader employee handbook that reserved the employer’s unilateral right to “change, rescind, or add to any policies” in its “sole and absolute discretion.” The employee acknowledgment form further confirmed that all handbook policies, except the at-will relationship, were “subject to change at any time.” Because nothing insulated the arbitration policy from that blanket modification authority, the court held the embedded arbitration policy was illusory — i.e., a promise the employer could take back at any time — and unenforceable.

The Bottom Line

The dividing line is straightforward: arbitration policies are more likely to be enforced when employers present arbitration as a clearly identified mutual commitment, backed by affirmative evidence of notice, an opportunity to review the policy, and employee acknowledgment. By contrast, an arbitration policy buried in a handbook the employer can unilaterally rewrite is vulnerable because it lacks the mutual commitment necessary to make an arbitration agreement enforceable. Courts see an arbitration policy the employer can modify at will as no agreement at all.

Steps for Employers to Support Arbitration Enforcement

• • Treat it as a contract, not just a policy. Present arbitration as a distinct, mutual agreement binding both the employer and employee.
  • Separate it from general handbook language. Use a standalone agreement or clearly carve the arbitration policy out from general handbook provisions allowing unilateral policy changes.
  • Explain the waiver clearly. State in plain language that covered disputes must be resolved in arbitration and that both sides waive the right to a court or jury trial.
  • Require affirmative acknowledgment. Obtain a signature, clicked acknowledgment button, or checked consent box, and preserve time-stamped records.
  • Confirm delivery and keep records. Maintain dated records showing when and how the policy was delivered, whether the employee opened or accessed it, and how the employee acknowledged or accepted it.
  • Use a continued-employment backstop. Provide that continued at-will employment after a defined notice period constitutes acceptance, if allowed by applicable law.
  • Limit policy modification rights. Require advance notice and limit changes to prospective only.
  • Make any opt-out process clear. Provide a defined deadline, clear instructions, and records showing whether the employee opted out.
  • Define covered and excluded claims carefully. Identify covered disputes, exclusions and any legally required carveouts.

Employers should review arbitration and dispute resolution policies for compliance with applicable state contract law, especially when operating across multiple jurisdictions. Please contact Tobi Murphy or any member of the Phelps labor and employment team with questions.