Dallas Employment Lawyer Blog
Griffin Gumm
Summary: If an employee signs an offer letter, employee handbook acknowledgment, or onboarding packet in Texas, there’s a good chance they also agreed to resolve future disputes through alternative dispute resolution (ADR) rather than in court. This blog breaks down what ADR actually is, how mediation differs from arbitration, what Texas law says about both, and what it means for an employee if their employer requires them to give up their right to sue.
What Is Alternative Dispute Resolution?
ADR is an umbrella term for any process used to resolve a legal dispute outside of a federal or state judicial system trial. In Texas, the two forms of ADR encountered by most employees are mediation and arbitration. Texas courts have long favored ADR as a way to resolve disputes more quickly and affordably than litigation, and the state even has its own statute, the Texas Alternative Dispute Resolution Procedures Act (Texas Civil Practice and Remedies Code, Chapter 154), that encourages courts to refer pending civil cases, including employment disputes, to an ADR procedure before trial.
Mediation vs. Arbitration: What’s the Difference?
These two terms get used interchangeably, but they work very differently, and the difference matters for an employer’s and employee’s rights.
Mediation is a non-binding, voluntary negotiation facilitated by a neutral third party: the mediator. The mediator doesn’t decide who wins. Their job is to help the employee and employer (or former employer) find common ground and reach a settlement — allowing both sides to bypass the hardships associated with litigation. If mediation doesn’t produce a settlement, the employee most likely still has the right to pursue their claim further. Some Texas courts may even order parties in employment lawsuits to attend at least one mediation session before a trial date is set, and the EEOC also offers a free, voluntary mediation program for many discrimination charges. Moreover, many private mediators (who are often former judges) exist to help facilitate settlements, and they are usually quicker to set mediation dates than the EEOC. However, private mediation does come with fees attached.
Arbitration is an adjudicative process that is binding, if the parties stipulate to that effect in advance. In a binding arbitration, an arbitrator (or panel of arbitrators) hears evidence and arguments (much like a judge would) then issues a decision, called an award, that is generally final and very difficult to appeal. When an arbitration agreement applies to a dispute between an employee and employer (or former employer), employees typically give up their right to a jury trial and their right to bring or join a class or collective action with coworkers.
Texas Law on Arbitration Agreements
Many agreements between Texas employers and employees that feature arbitration clauses are governed by the Texas General Arbitration Act (Texas Civil Practice and Remedies Code, Chapter 171) and Federal Arbitration Act (FAA) (the FAA applies to arbitration clauses that touch interstate commerce). Both Texas and federal courts apply a strong presumption in favor of enforcing valid arbitration agreements.
Why So Many Texas Employers Require Arbitration
Mandatory arbitration clauses have become standard in offer letters, employee handbooks, and stand-alone agreements across nearly every industry in Texas. Employers generally prefer arbitration because it’s private (there is no public court record), faster, avoids a jury trial, and written contractually in their favor. For employees, arbitration can mean no precedent to aid future, similarly-situated employees; more limited discovery; reduced chances of successful appeals; smaller damages awards; and, if a class-action waiver is included, no ability to join in an action with coworkers who faced the same treatment.
What to Do If You’re Asked to Sign an Arbitration Agreement (or Already Have)
Arbitration agreements and clauses should be read thoroughly. Look closely at what claims are covered, whether a class or collective action waiver is included, the presence or lack of jury trial waiver, who pays the arbitrator’s fees, and where the arbitration would take place. Don’t assume that a signed arbitration agreement automatically bars a right to sue over a workplace dispute (e.g., unpaid wages, discrimination, retaliation, or a wrongful termination). Some arbitration clauses are poorly drafted, unconscionable, or don’t cover the specific claim at issue. Texas and federal law both recognize limited exceptions to arbitration enforceability.
Talk to a Texas Employment Lawyer About Your Options
Whether you’re an employee deciding to sign an arbitration agreement, trying to understand one already signed, or preparing for mediation in an active dispute, the details matter, and they’re easy to misinterpret without proper legal training or advice. An experienced Texas employment lawyer can review your specific agreement, explain what rights you may have given up, and help you decide the best path forward, whether that’s mediation, arbitration, or, where possible, court. Contact Rob Wiley, P.C. today to schedule a consultation and get clear answers about the best solution for your specific issue. Thank you for learning!