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Kentucky General Assembly Passes Senate Bill 7

On Behalf of | May 30, 2019 | Banking Law, KB Blog, KB News

Kentucky General Assembly Passes Senate Bill 7

During its 2019 session, Kentucky’s General Assembly passed a number of new laws affecting the relationship between employers and employees.  One such law was Senate Bill 7, which amended portions of KRS 336.700.  Senate Bill 7 grants employers several new rights with respect to employment contracts.

First, and most significantly, employers may now require employees or applicants to submit to arbitration, mediation, or another form of alternative dispute resolution as a condition of employment.[1]  However, this arbitration agreement is subject to “general contract defenses” such as “fraud, duress, and unconscionability.”[2]  Further, any arbitration must be conducted in accordance with the Federal Arbitration Act: the arbitration must take place at a reasonable location; the arbitration agreement must be supported by sufficient mutuality of obligation; procedural fairness, including the selection of an impartial arbitrator and an equitable allocation of costs, must be ensured; and the arbitrator must be empowered to award all types of relief otherwise available for a party in a traditional judicial action, including punitive damages.[3]

Second, “an employer may require a former employee to execute an agreement to waive an existing claim as a condition or precondition for the rehiring of the former employee as part of a settlement of pending litigation or other legal or administrative proceeding.”[4]  This provision is unlikely to have a significant impact, as a waiver of existing claims is already virtually ubiquitous in all settlement agreements.

Third, as a condition of employment, an employer may require an employee or applicant to agree to reduce the statute of limitations of any claims by the employee against the employer.[5]  This provision of Senate Bill 7 contains two important exceptions.  First, the agreement does not apply to causes of action arising under state or federal law where an agreement to modify the statute of limitations is prohibited.  Second, the agreement cannot reduce the statute of limitations by more than half.

Fourth, if a state or federal law requires an employer to obtain consent from an employee or applicant to run a background check, an employer may require such consent as a condition of employment.[6]

A few other provisions of Senate Bill 7 are worth noting.  The amendments to KRS 336.700 apply retroactively.[7]  If an employer has previously required an employee to reduce his or her statute of limitations by greater than 50%, only that provision, and not the whole agreement, is invalidated.[8]  And the statue, as amended, explicitly does not apply to collective bargaining agreements existing between employers and employee unions.[9]

Kerrick Bachert regularly advises clients on issues related to employment law, including those implicated by Senate Bill 7.  If you or your organization have any questions regarding the impact of Senate Bill 7, we would welcome the opportunity to assist you.

[1] KRS 336.700(3)(a).

[2] Id. § 336.700(4).

[3] Id. § 336.700(5).

[4] Id. § 336.700(3)(b).

[5] Id. § 336.700(3)(c).

[6] Id. § 336.700(3)(d).

[7] Id. § 336.700(8).

[8] Id.

[9] Id. § 336.700(9).