You might recall SCOTUS’s 2017 smack down of a Kentucky common law rule regulating the formation of an arbitration agreement in Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1424 (2017). Liz wrote about the case here and here. Basically, in the case, the Kentucky Supreme Court said some unkind things about arbitration, reminiscent of the old-time hostility to arbitration that the FAA was designed to overcome.
More particularly, in the case, three wrongful death cases had been consolidated. In all three, a family member with power of attorney for the decedent had signed admission documents with care facilities that included an arbitration clause. The Kentucky Supreme Court said that the POAs did not grant the family members the necessary authority to waive the principal’s constitutional right of access to courts.
The case was modestly interesting doctrinally – but only modestly, as the core issue has been essentially settled since SCOTUS’s watershed 1984 decision, Southland v. Keating, 465 U.S. 1 (1984). Still, the Kentucky Supreme Court attempted to denominate its rule as a “generally applicable” contract defense that would apply to other sorts of serious waivers of rights in POAs. The idea was to squeeze into the savings clause of FAA § 2. But, in no uncertain terms, SCOTUS said it didn’t believe the state court. “We do not suggest that a state court is precluded from announcing a new, generally applicable rule of law in an arbitration case. We simply reiterate here what we have said many times before—that the rule must in fact apply generally, rather than single out arbitration.” Hammer. Dropped.
State courts and state legislatures cannot regulate the recourse to arbitration on any grounds other than generally applicable contract law defenses.
The Kentucky Supreme Court, however, didn’t get the message. (Or, more likely, it just didn’t seem to care. Remember, there’s an ongoing theme on this blog about some state court resistance to SCOTUS’s strong pro-arbitration policy.) In Northern Ky. Area Development District v. Snyder, 2018 WL 4628143 (Ky. Sept. 27, 2018), it held that the FAA did not preempt a Kentucky statute that prohibited an employer from requiring an employee 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.” Instead, employees could not be required to submit to arbitration as a condition of employment or ongoing employment.
Liz wrote about this case as well. And, as she said, what the hell! (Sorry, I’m paraphrasing.)
Fast forward to the waning days of March. The Kentucky legislature stepped in and saved SCOTUS from having to worry about reigning in the Kentucky Supreme Court. The legislature amended the statute at issue in Snyder, and on March 25, 2019, Governor Matt Bevin signed the Bill into law.
In a nutshell, the newly minted amendment nullifies Snyderand clarifies that employers may, among other things, require an employee or person seeking employment to execute an agreement for arbitration, mediation, or other form of alternative dispute resolution as a condition or precondition of employment.
The details of the new statute matter, of course, to lawyers, employers, and employees in Kentucky, but I think that the more interesting point is that we sometimes forget – or I do, at least – the potentially important role that state legislatures have to play in upholding the policies of the FAA.