Obama Signs into Law Restriction on Arbitration Clauses

Most military contractors will no longer be able to enforce mandatory arbitration clauses in their employment contracts under a provision signed into law over the weekend.

The provision is included in the 2009-10 spending bill for the U.S. Department of Defense, and it touches on an issue that has been a high priority this year for trial lawyers and for consumer groups. They say that clauses mandating the use of arbitration deny employees an impartial hearing in open court, while supporters of arbitration have defended the process as both fair and efficient.

The White House said today that President Barack Obama signed the spending bill into law on Saturday.

Jamie Leigh Jones, a former employee of defense contractor Kellogg Brown & Root, has been a public face for arbitration opponents for more than a year, after she reported being raped by her coworkers in Iraq. KBR and its former owner Haliburton sought to handle her case in arbitration, but the U.S. Court of Appeals for the 5th Circuit ruled in September that Jones could take some of her claims to court. Sen. Al Franken (D-Minn.) spoke about Jones’ case on the floor of the U.S. Senate in October, and he sponsored the new provision.

Under Section 8116 of the bill, no money can go to a defense contractor unless the contractor agrees not to enter into or enforce any employment contract “that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964,” or many tort claims.

In six months, the restrictions will apply also to subcontractors. Contracts and subcontracts under $1 million are except from the provision. The defense secretary or his deputy may also grant a waiver if doing so is “necessary to avoid harm to national security interests of the United States,” though the waiver will become public.

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