Illinois Gov. J.B. Pritzker just signed a bill into law, effective Jan. 1, 2020, that tries to outlaw mandatory arbitration clauses in employment contracts.
Arbitration agreements are where the employee agrees to waive the right to bring a claim in court, with judges and possibly juries hearing the claim, with rights of appeal, etc., etc. In arbitration, the parties agree on a person, or panel of persons, who listen to the claim, any defense the employer makes, and gives a finding. Often such agreements contain terms that the employee must keep secret the fact they made a claim or won or lost a claim.
Under the new law, arbitration clauses are unenforceable and void involving claims of unlawful employment practices. But only “to the extent it denies the employee a substantive or procedural right or remedy.”
And confidentiality of claims can be required by employers in the agreement if, among other things, the confidentiality is the documented “preference of the employee,” and there is “bargained for consideration” for the confidentiality.
The Illinois law also says that arbitration clauses can be allowed if it is a “mutual condition of employment or continued employment” and the agreement shows “actual knowing and bargained-for consideration from both parties.”
Wait, what again?
Exactly. All wishy-washy words, aren’t they?
The reason such language is wishy-washy is because the U.S. Supreme Court in a recent decision ruled that federal arbitration law, which allows and favors arbitration clauses, can void state laws prohibiting arbitration clauses when the state law “discriminates on its face against arbitration.” Remember, federal law cannot be contradicted by state law under the supremacy clause of the U.S. Constitution.
Thus, to avoid “discriminating on its face against arbitration,” the Illinois law has safety valve language. Words like an employee “being denied substantive or procedural right or remedy,” or “bargained-for consideration from both parties.”
Everything is bargained for by both parties. I’m gonna provide labor for you and in exchange you are going to pay me. You stick an employment contract in front of me that says all that and, by the way, has a mandatory arbitration clause for any claim I bring against you. I sign it.
Was the arbitration clause bargained for or not? Was it my documented preference to have an arbitration provision or not?
Such legislative word-salad may nevertheless be necessary to prevent getting the whole legislation axed by federal court rulings because, said the U.S. Supremes, the prohibition of arbitration clauses can run afoul of the long-standing Federal Arbitration Act.
We shall see how much proverbial teeth this new legislation will have to survive the Federal Arbitration Act ax.
One way to solve this speculation of survival is for the federal act to be amended to specifically allow states to prohibit arbitration in employment contracts, especially for claims involving sexual harassment.
And, what chance do we think that will have with the current employer-friendly Senate and White House?
The 2020 election looms huge. And not just for whether a six-time Chapter 11 real estate churl turned TV personality can gain a second term as the nation’s commander in chief with his finger on the nuclear button.