ARBITRATION AGREEMENTS LOSING FAVOR WITH CONGRESS
For many employers, arbitration is often a preferred remedy over civil litigation. The process is typically much faster than civil litigation, and as a result, tends to be less expensive. In recent years, however, several pieces of legislation have been introduced in Congress that would make pre-dispute arbitration agreements invalid and unenforceable in consumer and employment actions. (The proposed laws typically do not apply to arbitration provisions in collective bargaining agreements.)
Although the proposals to invalidate all arbitration provisions have not garnered majority support, recently Congress has passed legislation that limits the use of arbitration provisions for certain types of employment disputes. For example, the Department of Defense Appropriations Act, 2010 (the “Act”) contains a provision that restricts the ability of federal contractors to arbitrate certain employment-law claims. In particular, the Act provides that contractors that are party to a federal contract for an amount in excess of $1,000,000 are prohibited from arbitrating certain disputes. Specifically, the contractor may not enter into any agreement with its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under Title VII of the Civil Rights Act of 1964 or any tort related or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.
Additionally, the contractor may not take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that such claims must be resolved through arbitration. Finally, the contractor is required to certify that it requires each covered subcontractor to agree not to enter into and not to take any action to enforce any such arbitration provision discussed above. A “covered contractor” is defined as an entity that has a subcontract in excess of $1,000,000 on a contract.
Notably, the arbitration restrictions only apply to Title VII claims and claims related to sexual assault or harassment. Thus, the new provisions would not apply to claims brought under the Americans with Disabilities Act, the Age Discrimination in Employment Act, or related state laws. The prohibitions also do not apply to a contractor’s agreement with employees or independent contractors that may not be enforced in a court of the United States.
Although this legislation is limited in its scope, it is likely a harbinger of things to come.