ARBITRATION AGREEMENT CONDITION OF EMPLOYMENT TRIAL
Specifically, the Court found that any contract which conditions employment on the employee’s agreement to waive any legal right – including mandatory arbitration provisions which waive an employee’s right to a jury trial – is invalid. Therefore, the Court analyzed the case under Kentucky law and held that neither public nor private employers may require an employee to waive any legal right as a condition of employment, including the right to pursue a legal claim in court before a judge and jury. However, because KRS § 336.700(2) does not single out arbitration agreements specifically, but rather bars employers from conditioning employment on an employee’s waiver of any legal right, the Court found the statute is not preempted by the FAA. The Kentucky Supreme Court also affirmed, reasoning that the FAA does preempt any state law specifically regulating arbitration. The decision was later affirmed by the Kentucky Court of Appeals. The Boone Circuit Court agreed and denied NKADD’s motion to compel arbitration. The NKADD denied the former employee’s allegations.ĭespite having signed a clause in her employment contract conditioning continued employment on agreeing to arbitrate any disputes instead of litigate, the former employee argued that such a clause violated state and federal whistleblower laws and was therefore unenforceable. The former employee sued in Boone Circuit Court under the Kentucky Whistleblower Act and the Kentucky Wage and Hours Act claiming that NKADD had terminated her employment in retaliation for uncovering such evidence. The case began when the Northern Kentucky Area Development District, a public entity funded with federal monies, discharged an employee for allegedly uncovering evidence of fraud and mismanagement. Snyder, the Kentucky Supreme Court held in a unanimous opinion that the Federal Arbitration Act (“FAA”) does not preempt KRS § 336.700(2), a Kentucky statute which bars employers from conditioning employment on a current or prospective employee’s agreement to waive any legal right. In Northern Kentucky Area Development District v.
The decision makes Kentucky the first state in the nation to prohibit employers’ use of mandatory arbitration agreements as a condition of employment. On September 27, 2018, however, the Kentucky Supreme Court issued an opinion effectively banning both private and public employers from requiring employees to agree to arbitrate as a condition of being hired or remaining employed. Employment arbitration agreements, which require an employer and employee to arbitrate their disputes rather than litigate them, are a common practice in the private sector, as arbitration oftentimes is far more economical than litigation.
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