A bill that would make it more difficult for people to take their employers to court for sexual harassment, discrimination, wage theft and other issues is nearly through the Kentucky General Assembly.
Senate Bill 7, sponsored by Senate President Robert Stivers, R-Manchester, would allow Kentucky businesses to require their employees to enter an arbitration agreement as a condition of employment. It’s in response to a 2018 Kentucky Supreme Court ruling that made Kentucky the first state in the country to say employees can’t be forced into signing arbitration agreements.
“As an individual who owns a company, I should be able to have this in my employment contracts where I’m the individual who is investing and putting in the money, the capital, the resources, the person who is taking the risk ...” Stivers told a House committee last week.
Arbitration is a process used to settle disputes privately. Instead of an employee or groups of employees taking their complaint to court, an arbitration agreement would force them to negotiate using an arbitrator, rather than a judge or jury, to determine a resolution. The process is often preferred by businesses because it is cheaper, eliminates potential public embarrassment from a lawsuit and tends to favor employers.
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A 2017 report by the Economic Policy Institute found that more than half of private-sector employees in the country are subject to arbitration agreements but some of the largest companies in the country are moving away from them. Last month, Google ended its policy of forced arbitration after employees staged walk-outs protesting their arbitration agreements. Facebook dropped its forced arbitration for sexual harassment cases in November.
The Kentucky Supreme Court wrote that Kentucky law “invalidates arbitration contracts when the employer evidences an intent to fire or refuse to hire an employee because of that employee’s unwillingness to sign such a contract.”
“This is not an attack on the arbitration agreement — it is an attack on the employer for basing employment decisions on whether the employee is willing to sign an arbitration agreement,” wrote Chief Justice John Minton.
Rather than limiting their ruling to just public employees, the Kentucky Supreme Court’s unanimous opinion extended to the private sector, effectively nullifying existing mandatory arbitration agreements.
Critics of arbitration point to studies that show outcomes tend to benefit employers. A 2011 study at Cornell University found that employees win less often during arbitration agreements and that when they do win, they tend to get less money, based on data from the American Arbitration Association.
Rep. Patti Minter, D-Bowling Green, took issue with the bill in committee, saying it would put employees at a disadvantage.
“I would argue that ultimately, there is a fundamental inequality between the bargaining power of an employee and an employer and this seems to make that gap even bigger.” Minter said.
Stivers rebutted by saying he felt her opinion was based on assumptions.
“I think all of this is based on assumptions,” she responded.
Stivers and J.D. Chaney, deputy executive director of the Kentucky League of Cities, said arbitration agreements would allow employers to save money. They said because of the court ruling, Kentucky is the only state that doesn’t allow businesses to require arbitration agreements as a condition of employment.
Rep. Rick Rand, D-Louisville, said the bill will only hurt employees.
“All we’re doing is creating a parallel system of justice, with less transparency, with less rights for workers with more rights for employers, especially larger employers and people who can afford attorneys and people to write these things,” Rand said.
The bill has already been approved by the Senate and an amended version could get a vote on the House floor this week. If the Senate agrees with changes made by the House, it would then go to Gov. Matt Bevin for his signature or veto.