Contract grading and labor-based grading contracts have emerged as a prominent antiracist and equitable alternative to normative writing assessment, purportedly mitigating linguistic discrimination and anxiety for multilingual writers. This systematic review synthesizes 42 publications to critically evaluate this promise, examining contract grading’s theoretical foundations, empirical efficacy, and specific implications for multilingual writing pedagogy. The findings confirm that contract grading significantly reduces student anxiety and enhances perceptions of fairness by decoupling grades from subjective quality judgments. However, the review uncovers a critical equity paradox: While designed to combat racial and linguistic bias, rigid labor-based models can inadvertently create new inequities for disabled, neurodivergent, and time-poor students. Furthermore, empirical evidence on writing quality remains limited and mixed, and significant implementation challenges, including immense instructor workload and student resistance, threaten its scalability. The analysis identifies a predominantly U.S.-centric, theoretically fragmented research landscape with limited methodologic rigor in multilingual writing contexts. We conclude by proposing a future research agenda that prioritizes intersectional frameworks, robust comparative studies in global settings, and critical adaptations addressing the emerging challenges of generative artificial intelligence, urging the field to refine labor-based grading contracts into a more nuanced and inclusively effective practice for diverse multilingual writers.