In the enchanted world of employee benefits, one question looms large: when it comes to disputes under the Employee Retirement Income Security Act (ERISA), is arbitration the Wizard with all the answers? While ERISA claims are indeed arbitrable as a general matter, a growing number of circuit courts have ruled that arbitration clauses cannot overreach and extinguish substantive remedies. Several plan sponsors have tried to add arbitration clauses that waive plan-wide remedies, but courts have found them to constitute prospective waivers of participants’ statutory rights, rendering them unenforceable under the “effective vindication” doctrine.
Dear Old Federal Arbitration Act
Arbitration clauses are provisions in contracts that require parties to resolve their disputes outside of court, through private arbitration. The Federal Arbitration Act (FAA) was enacted to overcome a perception of judicial hostility towards arbitration agreements and to promote arbitration as a quicker, less expensive method for resolving disputes. Under the FAA, a written agreement to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA is thus “a congressional declaration of a liberal policy favoring arbitration agreements.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983).
At first glance, then, it would seem an agreement to arbitrate is the end of the yellow brick road. But as any ERISA traveler knows, the path is rarely so simple.
What Is This Effective Vindication Doctrine?
An arbitration clause may be able to dictate the forum and manner in which disputes are resolved, but it cannot “alter or abridge substantive rights.” Viking River Cruises v. Moriana, 596 U.S. 639, 653 (2022). Put another way, an arbitration clause cannot operate as a “prospective waiver of a party’s right to pursue statutory remedies.” American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 235 (2013). This is known as the “effective vindication” doctrine: courts will invalidate arbitration provisions that prevent parties from effectively vindicating their substantive rights or remedies under a statute.
The effective vindication doctrine is often implicated in ERISA cases because some plan sponsors have included mandatory arbitration provisions in their plans to try to avoid class action litigation. However—while courts have agreed that ERISA claims are generally arbitrable—the attempt to avoid class action litigation has not been a magical Oz outcome. The perhaps innocent attempt to waive class remedies has proven to be fraught with problems. See, e.g., Fleming v. Kellogg Co., 2024 WL 4534677, *5-6 (6th Cir. Oct. 21, 2024); Smith v. Board of Directors of Triad Manufacturing, Inc., 13 F.4th 613, 621-22 (7th Cir. 2021).
The key question, then, is whether arbitration provisions that attempt to prevent class actions are impermissible.
Dancing Through Court Decisions
In recent years, the Second, Third, Sixth, Seventh, Tenth, and now the Ninth Circuit have all found that arbitration provisions precluding representative actions prevent plaintiffs from “effectively vindicating” their rights under ERISA, making such provisions invalid. See Platt v. Sodexo, S.A., __ F.4th __, 2025 WL 2203415, *7 (9th Cir. Aug. 4, 2025); Parker v. Tenneco, Inc., 114 F.4th 786, 798 (6th Cir. 2024), cert. denied 145 S.Ct. 1060 (2025); Cedeno v. Sasson, 100 F.4th 386, 400-01 (2d Cir. 2024); Henry v. Wilmington Tr. NA, 72 F.4th 499, 506–08 (3d Cir. 2023), cert. denied 144 S.Ct. 328 (Oct. 16, 2023); Harrison v. Envision Mgmt. Holding, Inc. Bd. of Dirs., 59 F.4th 1090, 1106-09 (10th Cir.), cert. denied 144 S.Ct. 280 (2023); Smith v. Bd. of Dirs. of Triad Mfg., Inc., 13 F.4th 613, 620-21 (7th Cir. 2021). These decisions reasoned that the arbitration clauses at issue eliminated the ability for a participant to proceed in a representative capacity on behalf of the plan and to obtain relief for losses to the plan, which are substantive remedies provided by ERISA. Under the effective vindication doctrine, such provisions are unenforceable as prospective waivers of statutory rights and remedies.
Decisions to the contrary are becoming the exception, not the rule. An early unpublished decision compelled arbitration of ERISA claims on the basis that the plan had agreed to arbitration in the governing plan document and the plaintiff consented to individual arbitration. Dorman v. Charles Schwab Corp., 780 Fed. App’x 510, 514 (9th Cir. 2019). Since then, a few courts have allowed similar arbitration provisions. See Robertson v. Argent Tr. Co., 2022 WL 2967710, *10 (D. Ariz. July 27, 2022); see also Holmes v. Baptist Health S. Fla. Inc., 2022 WL 180638, *3 (S.D. Fla. Jan. 20, 2022). Those courts declined to apply the effective vindication doctrine on the basis that the restrictions on collective or plan-wide relief did not eliminate the participants’ ability to pursue statutory rights altogether, at least on an individual basis.
The Ninth Circuit’s recent Platt decision has since pulled back the curtain, signaling a growing trend that courts will not enforce arbitration clauses that limit ERISA’s representative and plan-wide enforcement mechanisms. The landscape continues to evolve. Pending appeals in the Fifth and Eleventh Circuits may soon expand the consensus further. Meanwhile, other courts have resolved arbitration disputes on more narrow procedural or contractual grounds, such as the presence or absence of an agreement to arbitrate in the plan document, see, e.g., Cooper v. Ruane, Cunniff & Goldfarb, Inc., 990 F.3d 173, 184 (2d Cir. 2021), whether a participant has effectively consented to an arbitration provision, Franklin v. Duke University, 721 F.Sup.3d 386, 397 (M.D. N.C. 2024), and whether the plan itself has consented to arbitration. Hawkins v. Cintas Corp., 32 F.4th 625, 636 (6th Cir. 2022).
Plan Sponsors Aren’t in Kansas Anymore
The tension between ERISA’s remedial framework and the flexibility of arbitration as a mechanism for dispute resolution presents both opportunities and challenges for plan sponsors and plan participants. For practitioners, the law appears to be moving toward a clearer consensus: ERISA’s representative enforcement scheme cannot be contracted away so easily. With the Fifth and Eleventh Circuits poised to weigh in on the issue, the story’s next chapter may confirm that ERISA’s protections are not so easily overridden – because no contract can truly defy gravity.
