Kentucky Companies May Not Condition Employment on Agreement to Arbitrate

The Kentucky Supreme Court has ruled that employers in that state may not require employees to sign an employment arbitration agreement as a condition of employment, as such a condition violates state law.FN1 A Kentucky statute prohibits employers from conditioning employment on an existing or prospective employee’s agreement to “waive, arbitrate, or otherwise diminish any existing or future claim . . . .”FN2 In Northern Kentucky Area Development District v. Snyder, the Kentucky Supreme Court held that: (1) the Federal Arbitration Act (“FAA”) did not preempt this statute because the statute does not prohibit arbitration agreements or single out arbitration agreements; and (2) a public employer’s conditioning continued employment on arbitration agreement was unenforceable under the statute.

Campbell Litigation believes the Snyder decision is a likely candidate for reversal by the U.S. Supreme Court if the employer in that case applies for certiorari (review) and the high court agrees to hear the case. Notwithstanding the prospects of this case on appeal, the decision means employers in Kentucky may continue to ask employees to enter into arbitration agreements, but may not condition employment or continued employment on such agreements.FN3 Practically, arbitration agreements in Kentucky may need to contain an opt out provision, or employers will need to offer some consideration (other than employment) to entice employees to enter into arbitration agreements.

Employers with a presence in Kentucky should re-assess their arbitration agreements. Employers wishing to implement arbitration agreements in any state should consult with an employment attorney to ensure the agreements comply with federal and state requirements.

Footnotes

FN1:   Northern Kentucky Area Development District v. Snyder, 2017-SC-000277-DG, 2018 WL 4628143 (Sep. 27, 2018)

FN2:   Kentucky Revised Statute (“KRS”) 336.700(2).

FN3:   See Snyder, 2018 WL 4628143, at *4 (the statute “prevents an employer from terminating or refusing to hire an individual who refuses to agree to such a clause”).