Question of the Month

November 2018

Question
Are mandatory, pre-employment arbitration agreements lawful in your area?
Answer from Alabama

In Alabama, yes.  The contract must not be unconscionable and the arbitration proceeding must provide a reasonably similar opportunity for redress to the aggrieved employee that the aggrieved employee would receive in court.

For more information please contact Michael Thompson at mthompson@lehrmiddlebrooks.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from California

This topic is a bit of a moving target in California and is constantly changing.  But, the general answer is that a carefully drafted arbitration agreement will be enforceable so long as it cannot be interpreted as both "procedurally unconscionable" and "substantively unconscionable." Any arbitration agreement required as a condition of employment (i.e., any mandatory arbitration agreement) is automatically considered procedurally unconscionable. Thus, to be enforceable in California, the substantive provisions of the agreement must not be unfair to the employee (i.e., substantively unconscionable). Some of the required terms to avoid substantial unconscionability: the agreement cannot be one-sided (i.e., the employer must also be required to arbitrate disputes); the employee must be able to obtain all of the damages and relief in arbitration that would be available in litigation; the specific arbitration rules must be attached as an exhibit to the agreement or described in the agreement such that the employee/applicant is making an informed choice; and the employer must pay the costs of arbitration in excess of any filing fee that an employee might have paid to initiate litigation in state or federal court.  In sum, other than a basic filing fee, all arbitration costs are paid by the employer.  Failure to include any of these provisions would likely render the agreement unenforceable. 

For more information please contact Michael Foster at mfoster@fosteremploymentlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Florida

In Florida, yes.

For more information please contact Wayne Helsby at whelsby@anblaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Georgia

In Georgia, yes. The arbitration clause must be at least initialed by all parties to the agreement.

For more information please contact Douglas Duerr at duerr@elarbeethompson.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Hawaii

In Hawaii, yes.  There are no special requirements in Hawaii, other than generally not being procedurally or substantively unconscionable.

For more information please contact Sarah Wang at SWang@marrjones.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Kentucky

In Kentucky, Yes.  No special requirements.  
 
Though the Kentucky Uniform Arbitration Act, KRS §417.050, et seq., does not apply to arbitration agreements “between employers and employees or between their respective representatives”, both the U.S. District Court for the Western District of Kentucky and the Kentucky Court of Appeals have found this statute to be preempted by the Federal Arbitration Act and that it does not affect the enforceability of valid arbitration agreements.  Johnson v. Career Systems Developments, 2010 WL 292667 *3-4 (W.D. Ky., January 20, 2010); Covington v. Pipe Fitters’ Local 502, 2005 WL 1540123 *8-9 (Ky. App., July 1, 2005).

For more information please contact Oliver Rutherford at obr@smithandsmithattorneys.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Maryland

In Maryland, the Court of Appeals (the highest state court) has held that continued employment is not sufficient consideration for an arbitration agreement.  Cheek v. United Healthcare of Mid-Atlantic, Inc., 835 A.2d 656 (Md. 2003).  The Court of Appeals recognized that a mutually binding promise to arbitrate could constitute sufficient consideration, but in this case determined that the employer’s promise to submit to binding arbitration was illusory, as it retained the ability to modify the arbitration policy at its discretion.  Therefore, no sufficient consideration existed. The U.S. District Court for Maryland, applying Cheek, found that a (non-illusory) mutual binding promise to arbitrate does constitute sufficient consideration for an arbitration agreement.  Hill v. Peoplesoft USA, Inc., 412 F.3d 540 (4th Cir. 2005).

For more information please contact Fiona Ong at fwo@shawe.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Massachusetts

In Massachusetts, yes. In order for an arbitration agreement to be enforceable with respect to certain employment-related claims, the arbitration agreement must state in “clear and unmistakable” terms that such claims are covered by the arbitration agreement.

For more information please contact Marylou Fabbo at mfabbo@skoler-abbott.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Minnesota

Pursuant to Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790 (Minn. 1995), assuming there is a valid and enforceable arbitration agreement, various discrimination claims arising under Minnesota law may be subject to compulsory arbitration under the Federal Arbitration Act.  Specifically, the Johnson court held that when there is a valid and enforceable arbitration agreement in place, MHRA claims may be enforced under the Federal Arbitration Act, but not under the Minnesota Uniform Arbitration Act.  See also Correll v. Distinctive Dental Services, PA, 607 N.W.2d 440 (Minn. 2000).  Accordingly, when feasible, arbitration agreements should be made subject to the Federal Arbitration Act and not the Minnesota Uniform Arbitration Act.

Finally, employers should proceed with caution regarding the use of mandatory arbitration provisions in light of the recent decisions by the NLRB, holding that such provisions may violate the NLRA. 

For more information please contact Tom Revnew at TRevnew@seatonlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Nevada

Mandatory pre-employment arbitration agreements are only enforceable if the applicant/employee signs a “specific authorization” indicating that the applicant/employee affirmatively agreed to such an agreement. See NRS 597.995. Collective bargaining agreements are exempt from this requirement.

For more information please contact Scott Abbott at sabbott@kzalaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from New York

Mandatory, pre-employment arbitration agreements are generally lawful in New York State. Effective July 11, 2018, employers may not include clauses requiring mandatory arbitration of claims of unlawful sexual harassment in employee arbitration agreements (however, collective bargaining agreements will control in the event that they conflict with this law’s provisions). Note also that, while one New York state appellate court has ruled that class, collective, and representative action waivers in employee arbitration agreements violate the National Labor Relations Act and are unenforceable, Gold v. N.Y. Life Insurance Co. (153 A.D.3d 216 (2017)), current Second Circuit precedent (issued before Gold) holds that such waivers are enforceable. See Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013). This split in case law is expected to be resolved by the U.S. Supreme Court. See Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA Inc., No. 16-307. The Gold decision is current precedent in Manhattan and the Bronx.

For more information please contact Nick Bauer at NBauer@cfk-law.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from North Carolina

Yes, arbitration agreements which are part of a contract or stand-alone agreement (i.e. not in a handbook, etc.) will be enforced absent other contractual deficiencies that can be attacked.

For more information please contact Bryan Adams at bryan.adams@vradlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Oregon

Oregon law allows an employer to require an employee to sign an arbitration agreement before beginning employment.  Such an agreement will typically be enforceable, unless it is procedurally and/or substantively unconscionable.  

Under Oregon law, procedural unconscionability refers to the conditions under which a contract is formed and it focuses on two factors: (1) whether the employee was oppressed into signing the agreement (i.e., whether there was such an inequality of bargaining power that the employee did not have a meaningful choice whether to sign the agreement), and (2) whether the employee was surprised in the sense that the terms of the arbitration agreement were hidden or obscured from the employee’s vantage.  Oregon courts have concluded that, on its own, being presented with an arbitration agreement in connection with an employment offer is not procedural unconscionability, as long as: (a) the employee was given time to read the agreement before assenting to it; and (b) the agreement was not in some way hidden or disguised.  See Bettencourt v. Brookdale Senior Living Communities, Inc., No. 09-CV-1200-BR,  2010 WL 274331, at *9-10 (D. Or. Jan. 14, 2010).

Substantive unconscionability focuses on whether the terms of the arbitration agreement are so unfair that it would violate public policy to allow an employer to enforce them.

For more information please contact Naomi Johnson at njohnson@bullardlaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Pennsylvania

Mandatory pre-employment arbitration agreements are currently lawful in Pennsylvania.  Pennsylvania does not have any special requirements for pre-employment arbitration agreements; the validity of a pre-employment arbitration agreement is determined by application of regular contract principles.

For more information please contact John Ellis at jellis@ufberglaw.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Texas

In Texas, yes. It should comply with Texas Civil Practice and Remedies Code, Chapter 171.

For more information please contact John Freeman at jfreeman@keyharrington.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Virginia

Yes.  Arbitration Agreements will be enforced on the same terms as any other enforceable contract.  See Va. Code §§8.01-577, 8.01-581.01

For more information please contact Susan Carnell at scarnell@lorengercarnell.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Washington

Effective June 7, 2018, a new section was added to RCW 49.44 stating that an employment contract or agreement provision is void and unenforceable if it requires an employee to (i) waive his/her right to publicly pursue a federal or state discrimination claim, (ii) publicly file a complaint with the appropriate federal or state agencies, or (iii) resolve discrimination claims in a confidential dispute resolution process.  SSB 6313.

For more information please contact Ken Diamond at ken@winterbauerdiamond.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

Answer from Wisconsin

Yes.  Additionally, there are no special provisions required by Wisconsin law.

For more information please contact Laurie Petersen at LPetersen@lindner-marsack.com

*Disclaimer: All answers to the Question of the Month are current the day on which they are posted. After this date, the information may subsequently change as a result of laws or rulings. For the most current information, please contact the responding lawyer for each state in which you are interested.

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