The freedom of Kentucky employers to require mandatory arbitration agreements as a condition of initial or continued employment was again confirmed this week after the General Assembly gave final passage to Senate Bill 7 on March 13th. The bill, which was sponsored by Senate President Robert Stivers, serves to clarify Kentucky's arbitration statutes in light of the Federal Arbitration Act ("FAA") and the Supreme Court of Kentucky's decision last fall in Northern Kentucky Area Development District v. Snyder (SKO's prior coverage of that decision can be found here: Kentucky Employers Can't Enforce Arbitration Agreements Required for Employment).
In Snyder, the Supreme Court of Kentucky broke with decades of pro-arbitration decisions from the U.S. Supreme Court and lower federal and state courts in Kentucky when it held that the FAA did not preempt Kentucky Revised Statute 336.700, which nominally prohibits employers from requiring employees to sign arbitration agreements as a condition of employment. The Snyder decision, which is not yet final in light of a pending petition for rehearing, threatened to make Kentucky the first and only state in the nation to prohibit employers' use of mandatory arbitration agreements as a condition of employment.
In an effort to remedy the damage caused by the Snyder decision and restore the long-time status quo, the language of Senate Bill 7 amends state law to retroactively restore the rights of employers to require arbitration agreements as a condition of employment. The bill also allows employers and employees to agree to a modified period of limitations when permitted under applicable law, and establishes certain procedural requirements for arbitration to safeguard the effective vindication of the parties' legal rights.
The bill now heads to the Governor's desk for signature.
Moving forward, Kentucky employers who use mandatory arbitration agreements as a standard condition of initial or continued employment should review those agreements to ensure they are in compliance with the procedural requirements of the new law.
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