Virginia’s New Constraints on Mass Arbitrators Creates Employer Burdens + Opens Door to Challenge Awards

Takeaways

• Virginia legislation taking effect July 1 imposes new requirements on “high-volume” arbitration service providers, including procedures for arbitrator selection, strict deadlines for payment of arbitration fees and grounds for challenging an arbitration award (among other penalties) if those requirements are not met.
• The requirements apply to arbitration agreements with Virginia-based employees.  
• Employers in Virginia should review their arbitration agreements and provider rules to ensure they comply with the new requirements to avoid potential vacatur of arbitration awards and other risks.

Link

• Viriginia Arbitration Fairness Act

Article

Legislation recently signed into law in Virginia will impose new requirements for “high-volume arbitration service providers” and additional burdens for employers seeking to utilize their services.  

The Arbitration Fairness Act (SB 227), which takes effect July 1, 2026, amends the Virginia Uniform Arbitration Act to add new requirements for arbitration providers conducting “high-volume” or mass arbitrations. Among other provisions, the law regulates how arbitration providers are selected and imposes disclosure requirements for arbitrators, pitfalls for employers that fail to timely pay required arbitration fees and grounds for vacating an arbitration award for noncompliance, among other provisions.

While the new law primarily regulates commercial arbitration providers, it has significant implications for employers with operations in Virginia who maintain workplace arbitration agreements and use arbitration providers to resolve disputes.  

The legislation applies to pre-dispute arbitration agreements entered into on or after July 1, 2026, between an individual employed in Virginia and that individual’s employer. The law applies to “Virginia-connected transactions,” defined broadly to include “any transaction, agreement, or dispute” arising out of or connected with activities, relationships or events in Virginia, including arbitrations ordered by a Virginia state or federal court.

The statute states that its requirements shall be incorporated as material terms of any pre-dispute arbitration agreement entered into pursuant to Virginia contract law.

Definition

• High-Volume Arbitration Service Providers

The law defines a high-volume arbitration service provider as “any person or entity that administers, facilitates, or provides arbitration services” in Virginia and “conducts more than 100 arbitrations per calendar year” of proceedings that “arise from a pre-dispute arbitration agreement involving a Virginia-connected transaction.”   

Key Provisions

• Arbitrator Selection  

Under the law, arbitration providers must establish procedures for impartial arbitrator selection that allows for “meaningful input” from both parties and prevents a party from unilaterally imposing an arbitrator. Acceptable selection methods include strike-and-rank procedures, ranking procedures, random selection from a mutually approved pool or another method that prevents one party from compelling the other to accept an arbitrator without meaningful input. High-volume arbitration service providers generally use such procedures and thus already appear to be in compliance.  

The law imposes extensive disclosure requirements for arbitrators of “all matters that may cause a person who is aware of the facts to have reasonable uncertainty” about the proposed arbitrator’s impartiality. That includes any pending arbitrations or arbitrations within the last five years where the arbitrator has served as an arbitrator for a party to the arbitration proceeding or for a lawyer for a party to such proceeding — including the names of the parties and “the results of each case arbitrated to conclusion,” the text of a written arbitration award, the prevailing party, attorneys’ names and monetary damages awarded.  

• Fee Payment Deadline

When the employer (as the drafting party) is required by the provider’s arbitration rules or applicable law to pay fees or costs before the arbitration can proceed, the employer must pay required initiation fees or costs within 30 days after the due date. The failure to pay fees within 30 days of receipt of invoice will be deemed a waiver of the right to compel arbitration. However, the statute also provides than an arbitration agreement may include an “express provision … stating the number of days within which the parties to the arbitration must pay any required fees or costs.”  This appears to provide some leeway to draft a provision on timing of payment of fees that is more forgiving than the baseline statutory requirement.  

If the employer is in default, the employee may withdraw the claim from arbitration and proceed in court or compel arbitration, with the employer paying attorneys’ fees and arbitration costs. The statute directs a court to “impose sanctions on the drafting party” if the dispute proceeds in court; however, this provision applies expressly to consumers and not employees.

• Tolling Period

Under the law, statutes of limitations are tolled from the date a party sends a written arbitration demand to the provider until 90 days after termination or completion of the arbitration. Additional tolling rules apply when an employee withdraws from arbitration after default and files a civil action before a court determines the matter is subject to arbitration.

• Grounds to Vacate Award

A court can vacate an arbitration award issued by an arbitrator selected in violation of the statutory requirements. A party may seek injunctive relief or other civil remedies in the appropriate Virginia circuit court or in the Circuit Court for the City of Richmond, Virginia, or seek to vacate an award already issued. The new law also amends Virginia’s vacatur statute to add an award rendered by an arbitrator selected in violation of the law’s provisions as an express ground for vacatur.

Litigation Ahead

The Virginia law will invite increased litigation over arbitration proceedings and enforcement of arbitration awards. For example, the law may generate disputes over choice-of-law provisions in arbitration agreements or its application to employees with only loose connections to Virginia.

Additionally, the statute is certain to face challenges on preemption grounds under the Federal Arbitration Act (FAA) because the state law appears to single out arbitration agreements for disfavored treatment in violation. Federal preemption disputes are bound to occur despite a provision in the law which asserts it should not be construed as preempting “federal law governing arbitration” and should be interpreted consistent with federal law “to the maximum extent permitted.”

Employer Takeaways

Covered employers should review their arbitration agreements and designated arbitration providers to ensure compliance with the Virginia law and to reduce the risk of legal challenges to their agreements and post-award litigation.  

Consider these steps to avoid procedural missteps, which can become powerful leverage for employees in a dispute:

• Include language in the arbitration agreement providing for a longer period (i.e., 60 days) in which to pay fees and a stipulation that inadvertent failure to pay fees on time shall not be deemed a waiver of the right to arbitrate.  
• Make sure there are protocols in place for prompt payment of invoices from arbitration providers.  
• Draft selection procedures to provide both parties with a meaningful opportunity to agree on an arbitrator (or ensure that the designated arbitration provider has such procedures in its rules).
• Confirm that your selected arbitration service provider is in full compliance with Virginia’s procedural requirements.
• Employers with Virginia choice-of-law or venue provisions should consider whether these create undue risk in the event of coordinated arbitration filings.

Also, consult with counsel experienced in drafting arbitration agreements that comply with these Virginia requirements and restrictions across other jurisdictions to best protect the employer’s right to arbitrate disputes.

Please contact your Jackson Lewis attorney with any questions about the Virginia law or workplace arbitration.