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Kentucky Highest Court Strikes Down Enforceability of Pre-Employment Arbitration Agreements

A common provision in employment agreements may no longer be enforceable, at least for employers in Kentucky. At the commencement of employment, employers often have their new hires sign employment agreements outlining basic terms of their new employment. A common provision in these agreements is a requirement that any disputes related to employment be settled through binding arbitration as opposed to through the court system. Given the general support for arbitration agreements provided by Courts under the Federal Arbitration Act, these provisions are routinely upheld. However, a recent decision by the Kentucky Supreme Court has gone against this trend.

In Northern Kentucky Area Development District v. Danielle Snyder, The Kentucky Supreme Court held that the NKADD acted beyond the scope of its power when it conditioned employment upon an employee’s willingness to sign an arbitration agreement. The Court based this decision on a Kentucky Statute which prohibits employers from conditioning employment on an existing employee’s 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….” KRS § 336.700(2). Because this statute does not specifically target or discriminate against arbitration agreements—instead prohibiting any agreement whatsoever that conditions employment on the employee’s agreement to waive any and all rights against the employer—the Court found that the FAA did not control.

While the Court’s decision focused specifically on a public employer, the language used in the opinion suggests that the same interpretation may be applied to private employers. Moving forward, employers in Kentucky seeking to enforce an arbitration agreement may need to show that an individual’s employment was not conditioned upon accepting such agreement

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