Arbitration Clauses in Pennsylvania: Enforceability Guide
How Arbitration Works in Contracts
An arbitration clause commits the parties to resolving disputes through a private process instead of litigation. In Pennsylvania, these clauses are common in employment agreements, consumer contracts, construction agreements, and commercial deals.
Pennsylvania's Legal Framework
Pennsylvania has its own Uniform Arbitration Act (42 Pa.C.S. Chapter 73) and also recognizes the Federal Arbitration Act for contracts involving interstate commerce. Pennsylvania courts have long upheld arbitration agreements, following the principle established in Salley v. Option One Mortgage Corp. (2009) that valid arbitration agreements should be enforced.
Notably, Pennsylvania distinguishes between statutory arbitration and common-law arbitration, with different rules governing each. Most modern contracts invoke statutory arbitration.
Grounds for Challenging Enforcement
- Unconscionability — Pennsylvania courts apply a two-part test: procedural unconscionability (unequal bargaining power, hidden terms) and substantive unconscionability (oppressively one-sided terms)
- Failure to meet statutory requirements — The Uniform Arbitration Act requires the agreement to be in writing and signed
- Waiver — If a party actively litigates in court before invoking arbitration, a court may find they waived their right to arbitrate
- Public policy concerns — Pennsylvania courts have occasionally refused to enforce arbitration clauses that effectively bar statutory claims
Red Flags in Your Contract
- The clause bars all forms of collective or class-based claims
- Arbitration must take place in a state other than Pennsylvania
- The losing party must pay all arbitration fees
- The clause prohibits any appeal or judicial review of the arbitrator's decision beyond what the statute permits
When to Consult a Lawyer
Consider reaching out to a Pennsylvania attorney if you are being asked to waive your right to a jury trial through an arbitration clause, particularly in an employment or consumer context. An attorney can help determine whether the clause is likely to be enforced.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.