September 26, 2025
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…