New amendment to change employee litigation rules.

• Author: McGrath, Dorn C.
• Position: ETHICSCORNER

Alternative dispute resolution has been a trend for employment claims as judicial and employee attitudes regarding the benefits of arbitration and burdens of litigation have shifted. The time and cost consumed in litigating employment claims has suggested that many are best resolved by mediation followed by arbitration, if needed. The U.S. Supreme Court has confirmed that even important statutory rights can be subject to mandatory arbitration.

Running counter to this trend is the Franken Amendment, sponsored by Sen. Al Franken, D-Minn., and signed into law as Section 8116 of the 2010 Defense Appropriations Act. It is applicable to solicitations and contracts exceeding $1 million. This law bars defense contractors and subcontractors from requiring employees, as a condition of employment, to agree to mandatory arbitration of discrimination claims under Title VII of the Civil Rights Act of 1964, based on race, color, religion, sex or national origin.

The Franken Amendment also restricts arbitration of tort claims related to sexual assault or harassment, assault and battery, intentional infliction of emotional distress, false imprisonment, and negligent hiring, supervision or retention. Also, existing agreements to arbitrate these claims may not be enforced by defense contractors or subcontractors.

The Franken Amendment seeks to ensure access to courts for claims unrelated to an employment relationship. For example, a serious criminal matter should not be confined to mandatory arbitration. Unfortunately, the anti-arbitration emphasis of the new rule extends much further to include many otherwise commonly-arbitrated employment disputes.

The Franken Amendment was implemented this year by an interim Defense Federal Acquisition Regulation. The Defense Department is reviewing industry and other comments highlighting the difficulties in the current interim rule pending release of the final rule.

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For example, as of June 17, the interim rule requires prime contractors to certify that subcontractors are in compliance with the new requirement not to use arbitration for the identified types of claims. Many projects involve multiple subcontractor levels, beyond the direct contractual relationship or control of the prime contractor, yet the current rule is not limited to first-tier subcontracts. Therefore, to ensure compliance, contractors need guidance as to the actual scope of the new rule.

Prime contractors often lack visibility...