Arbitration agreements between employers and employees are common. Arbitration agreements have been the subject of many recent court decisions, including the United States Supreme Court decision in Epic Systems Corp. v. Lewis, which upheld the enforceability of employment arbitration agreements with class action waivers.
Notably, the Supreme Court of Kentucky just issued an opinion striking down a broad category of arbitration agreements. In Northern Kentucky Area Development District (NKADD) v. Snyder, the Court held that Kentucky law prohibits employers from conditioning employment on an employee’s agreement to arbitrate disputes that may arise between them.
In disallowing the practice, the Court relied on Kentucky Revised Statute 336.700(2), which states that employers may not condition employment on an existing or prospective employee’s agreement to “waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled.” Employers should note that the case does not prevent employers and employees from agreeing to arbitrate all disputes, as long as the agreement is not a requirement of employment.
Kentucky employers should be aware of this landmark case. NKADD may ask for reconsideration from the Kentucky Supreme Court, or it may seek review by the United States Supreme Court. However, if the case becomes final, a significant number of arbitration agreements between employers and employees in the Commonwealth of Kentucky may be voided.