Wednesday, January 27, 2010
Congress Bans Cramdown Arbitration Provisions by Defense Contractors and Certain Subcontractors (Public Law Pub. L. 111-118, Section 8116(a)
Kudos to United States Senator Al Franken (D-Minn.), for getting Congress to ban mandatory cramdown arbitration agreements in employment contracts with defense contractors and subcontractors.
In 1989, U.S. Department of Labor Associate Chief Administrative Law Judge James Guill and I published an article, "A Rush to Unfairness -- the Downside to Alternative Dispute Resolution" in the American Bar Association Judge's Journal.
We warned the Nation's judges of the ADR trend, which the current permissive Supreme Court majority has allowed to inflict cramdown arbitration agreements on employees.
Three cheers for Senator Al Franken, author of Rush Limbaugh is a Big Fat idiot and Lies and the Lying Liars Who Tell Them, and other scholarly works written with the assistance of Harvard University students.
This sea change in the law has been a long time coming. I've been waiting for this day since 1988, when we published our article, which mentioned the ADR propaganda being foisted off on unsuspecting ABA members.
I was revolted when, at the 1994 ABA Annual Meeting in New Orleans, I heard a defense contractor lawyers speak about how they were going to take employees' rights away by making them sign contracts of adhesion requiring arbitration. As Justice William Rehnquist said, the right to jury trial is a bulwark against oppression.
Here's the Arnold & Porter LLP report on the implications of the new worker protection law.
Congress Proscribes the Right of
Defens e Contractors to Mandate
Arbitration of Certain Employment Matters
(Written for the March 2010 issue of Professional Services Council's Service
By February 17, 2010, defense contractors must assure that their employment
agreements comply with the Department of Defense Appropriations Act for
2010, Pub. L. No. 111-118. Section 8116 of the Act, a modified version of an
amendment offered by Senator Al Franken, prohibits defense contractors and
certain of their subcontractors from requiring employees and independent
contractors to arbitrate various employment claims.1 Section 8116 implements
this prohibition by creating several conditions for award of Department of Defense
(DOD) contracts in amounts greater than US$1 million.
The first condition, which, regardless of when the solicitation was issued,
applies to any covered contract award made after February 17, 2010, requires
the contractor to agree not to:
(1) enter into any agreement with any of its employees or independent
contractors that requires, as a condition of employment, that the
employee or independent contractor agree to resolve through
arbitration any claim under title VII of the Civil Rights Act of 1964
or any tort related to or arising out of sexual assault or harassment,
including assault and battery, intentional infliction of emotional
distress, false imprisonment, or negligent hiring, supervision, or
(2) take any action to enforce any provision of an existing agreement
with an employee or independent contractor that mandates that the
employee or independent contractor resolve through arbitration any
[such claims]. . . .
This condition prohibiting mandatory arbitration clauses and their enforcement
by DOD contractors is written broadly and appears to cover all employees
and independent contractors of the subject contractor rather than to be limited
expressly to those employees and independent contractors performing work
under the covered DOD contract. Contractors should take note of the specific
1 Pub. L. 111-118, Dec. 19, 2009, 123 Stat. 2409, § 8116.
2 Id. at § 8116(a) (emphasis added).
claims covered by the proscription: all Title VII claims (i.e.,
claims relating to race, sex, national origin, and religious
discrimination) and tort claims related to or arising out of
a claim of sexual harassment or assault. Section 8116
does not cover employment claims brought under any
other federal statute (e.g., the Americans with Disabilities
Act or the Age Discrimination in Employment Act) or
to unspecified employment claims brought under state
The second Section 8116 condition, which again, regardless
of when solicited, applies to any covered contract award
after June 17, 2010, requires the contractor to certify that
each covered subcontractor agrees not to enter into or take
any action to enforce agreements mandating arbitration of
the employment-related claims covered by Section 8116.3
Section 8116(b) defines a “covered subcontractor” as an
entity that has a subcontract in excess of US$1 million on
a contract covered by Section 8116.4 Unlike the seemingly
broad proscription applicable to prime contractors, the
covered subcontractor proscription expressly applies
only to employment agreements with “any employee or
independent contractor performing work related to such
Section 8116 exempts from coverage any contractor or
subcontractor employment agreements with employees
or independent contractors that may not be enforced in
a court of the United States.6 The section also permits
the Secretary of Defense to waive the conditions for a
particular contractor or subcontractor if the Secretary or
the Deputy Secretary personally determines in a writing,
which is transmitted to Congress and made public, that
“the waiver is necessary to avoid harm to national security
interests of the United States, and that the term of the
contract or subcontract is not longer than necessary to
avoid such harm.”7
It is unclear whether or when the DOD will issue
acquisition regulations to implement these statutory
3 Id. at § 8116(b).
6 Id. at § 8116(c).
7 Id. at § 8116(d).
requirements. Nevertheless, in light of Section 8116’s
rapidly approaching effective dates, DOD contractors
should promptly and carefully evaluate their employment
practices to determine whether they must revise their
employment agreements and dispute resolution programs
to comply with the Section 8116 requirements effective
after February 17, 2010. Covered prime contractors also
must implement procedures to ensure that, after February
17, 2010, they no longer enforce provisions included in
pre-February 17, 2010 employment agreements which
mandate arbitration of the claims covered by Section
8116. Further, DOD contractors should evaluate their
subcontracting processes and agreements to ensure that
their covered subcontractors understand and agree to
the specific flow-down provisions in Section 8116. Finally,
DOD contractors and subcontractors should educate their
relevant human resources and related personnel on these
Section 8116 requirements.
The enactment of this provision prohibiting mandatory
arbitration clauses in defense contractor and subcontractor
employment agreements is a marked departure from
past Congressional action. For many years, Congress
has considered, yet failed to enact, proposed legislation
targeting mandatory agreements to arbitrate employmentrelated
claims.8 It remains to be seen whether Section
8116 is a forerunner to broader Congressional action in
We hope that you have found this advisory useful. If you have
additional questions, please contact your Arnold & Porter
Kara L. Daniels
Matthew D. Keiser
8 See, e.g., Fairness in Nursing Home Arbitration Act of 2008
(H.R.6126 and S.2838, 110th Cong.) and of 2009 (H.R.1237 and
S.512, 111th Cong.); Arbitration Fairness Act of 2007, (H.R.3010
and S.1782, 109th Cong), and of 2009 (H.R.1020 and S.931, 111th
Cong.); see also Civil Rights Procedures Protection Act of 1997
(H.R.983 and S.63, 105th Cong.).