Mandatory Arbitration, Shortened Statutes of Limitations, and Background Checks for Employees? You Bet!

In October 2018, the Kentucky Supreme Court issued a far-reaching opinion voiding all Kentucky employer-employee arbitration agreements which were made a condition of an individual’s employment.

On March 13, 2019, however, the Kentucky Legislature rejected that opinion, passing a bill that not only claws back the ruling but significantly expands employers’ options for imposing conditions on the employer-employee relationship.

The new law, which is headed to the Governor's desk and slated to take effect in July 2019, allows employers to require arbitration, mediation, and alternative dispute resolution agreements as a condition or precondition to employment.

Additionally, the bill permits employers to:

• require that employees waive claims as a condition or precondition of rehiring;
• require that employees undergo a background check as a condition or precondition of employment in conformity with state or federal law requiring background checks; and
• contractually reduce the statute of limitations for any employment-related claims as a condition or precondition of employment, so long as the agreement does not apply to state or federal law that preempts modifying limitations.

These provisions will generally apply to all Kentucky employment contracts, exempting only collective bargaining agreements.

Although the law will not take effect for several months, it will be applied retroactively and prospectively, meaning that any arbitration agreements conditioned on employment which were signed before the bill takes effect will be enforceable.

The final bill, and its history, can be viewed here.

If it has been awhile since you’ve reviewed your employment and arbitration agreements, dust them off and contact one of our employment attorneys for assistance with any questions about the new law or any other compliance matters. Stites & Harbison assists clients of all sizes, including publicly traded corporations, privately-held companies, small businesses, and non-profit organizations alike.