Kentucky Supreme Court rules employers cannot make employees sign arbitration agreements

The Kentucky Supreme Court on Tuesday dealt a blow to Kentucky employers dramatically altering how public and private employers hire workers.

The Supreme Court decision, originating from a case involving former employees of the Northern Kentucky Area Development District (NKADD), ruled that employers  — both public and private — cannot require future employees to sign arbitration agreements.

With this ruling, Kentucky is now the only state that says pre-employment arbitration agreements are null and void.

Arbitration agreements are common practice, especially in the private sector, and while many feel the ban for arbitration agreements is defensible for public agencies, extending it to private companies is considered by some to be a stretch of the law.

The court decision states “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 . . . .”

The NKADD has not decided the next step in this case, but could include asking for reconsideration by the Kentucky Supreme Court, appealing the case up to the U.S. Supreme Court or asking the legislature to pass a bill.