N. Ky. Area Dev. Dist. v. Snyder, No. 2017-SC-000277-DG (Sup. Ct. Ky. Sept. 27, 2018) [click for opinion]

The Supreme Court of Kentucky recently ruled that a state agency exceeded its power when it required an employee to sign an arbitration agreement as a condition to employment. KRS § 336.700 (2) prohibits employers from requiring employees to sign arbitration agreements as a condition to employment. Critically, the Supreme Court of Kentucky held that the Federal Arbitration Act ("FAA") does not preempt the Kentucky statute.

Plaintiff Danielle Snyder was employed by the Northern Kentucky Area Development District ("NKADD"), an administrative agency providing community services to citizens in Kentucky. After NKADD terminated Ms. Snyder, she filed suit against NKADD in Kentucky state court. NKADD moved to stay the proceedings, arguing that the arbitration clause in Ms. Snyder's employment contract mandated arbitration.

The Supreme Court of Kentucky disagreed. While the court recognized the FAA's broad preemptive effect, it reasoned that because the statute at issue "simply prevents NKADD from conditioning employment on the employee's agreement to arbitration," and does not proscribe "the act of agreeing to arbitration," the FAA did not preempt KRS § 336.700 (2). Thus, Ms. Snyder's claims were allowed to continue in Kentucky state court.