Consumer Law & Policy Blog

Kentucky Supreme Court: state law prohibiting employers from conditioning employment on an agreement to arbitrate is not preempted by the Federal Arbitration Act

The Kentucky Supreme Court's unanimous decision is Northern Kentucky Area Development District v. Snyder. The first two paragraphs of the court's opinion summarizes its reasoning:

Kentucky Revised Statute (“KRS”) 336.700(2) 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 . . . .” When Northern Kentucky Area Development District (“NKADD”) conditioned Danielle Snyder’s continued employment on her agreement to arbitrate any dispute that may arise between them, that agreement violated KRS 336.700(2). As a result, the arbitration agreement between NKADD and Snyder—the enforcement of which is the basis of the case before us today—is unenforceable as a matter of state statutory law.

NKADD correctly asserts that the Federal Arbitration Act (“FAA”)’ broadly prohibits discrimination against arbitration agreements. It then argues that the FAA preempts the operation of KRS 336.700(2) under the facts of this case. But, rejecting NKADD’s argument, we hold that no such discrimination occurred here because KRS 336.700(2) does not prohibit arbitration agreements, limit the power of persons to enter voluntarily into arbitration agreements, or single out arbitration agreements in any way. Correctly viewed, KRS 336.700(2) is an anti-discrimination statute that prohibits employers from conditioning employment on an agreement to, not only arbitration, but also any waiver or diminution of the employee’s existing or future rights or claims for benefits arising out of employment. So, on discretionary review, we affirm for different reasons the Court of Appeals’ decision that affirmed the trial court’s order denying NKADD’s motion to compel enforcement of the arbitration agreement. And we remand this case to the trial court for further proceedings consistent with this opinion

Department of Education will miss the deadline to gut borrower protections this year

In a filing last night, the Department of Education announced that it will miss a November 1 statutory deadline to publish a rule that rolls back protections for student loan borrowers and students defrauded by for-profit colleges. Those protections, part of what’s known as the Obama-era borrower defense rule, were set to go into effect in July 2017 but have been unlawfully delayed by Secretary DeVos.

The Department’s inability to push through the new changes is good news for the public and taxpayers, who were intended to benefit from those protections. Now the Trump Administration’s deregulatory action on these protections can’t possibly take effect until July 2020.

Getting relief to the students who need is an ongoing effort, though. Last month a federal district court held that the delays of the Obama-era rule that were still in force were unlawful. However, it held off on vacating one of those delays until October 12 to give the Department an opportunity to correct the deficiencies of that delay, if it could.

In the meantime, litigation over the rule has heated up in a separate case brought against the Department by a trade association representing for-profit schools. That association has moved to enjoin the Obama-era protections until it can fully litigate its claims. Two borrowers and a group of states are participating in the suit to help defend the rule from industry attack.

You can see the filing here.

California effort to limit forced arbitration of sexual harrassment claims vetoed

Citing the U.S. Supreme Court's precedent in favor of arbitration, California Governor Jerry Brown yesterday vetoed a bill that would end the practice of employers requiring workers to use private arbitration instead of the courts to resolve sexual harassment complaints. The bill would not have barred workers from voluntarily opting for arbitration, only barred predispute agreements requiring arbitration.

An LA Times article is here.

Is California's new net neutrality law preempted by federal law?

California's net neutrality law was just signed into law. The Justice Department says it will sue to invalidate California's law on federal preemption grounds. Read about it here.