570 S.W.3d 531
Mo. Ct. App.2018Background
- NKADD, a Kentucky state-created area development district, required employee Danielle Snyder to sign an arbitration agreement as a condition of employment; Snyder later was terminated and sued under the Kentucky Whistleblower Act and Kentucky Wages and Hours Act.
- The arbitration form explicitly stated signing was a condition of employment and that rejection would end employment consideration.
- NKADD moved to compel arbitration; the trial court denied the motion and the Court of Appeals affirmed, holding NKADD lacked authority to impose such a condition.
- KRS 336.700(2) provides that no employer shall require as a condition of employment that any employee waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit under state or federal law.
- The Kentucky Supreme Court concluded KRS 336.700(2) applies to NKADD (a public agency) and thus NKADD acted ultra vires by conditioning employment on agreement to arbitrate, rendering the arbitration agreement void.
- The Court further held the Federal Arbitration Act (FAA) does not preempt KRS 336.700(2) because the statute does not single out or discriminate against arbitration agreements but broadly prohibits conditioning employment on waiving rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NKADD had authority to condition employment on agreement to arbitrate (ultra vires) | Snyder: statute KRS 336.700(2) prohibits such conditioning; NKADD lacked authority. | NKADD: its statutory powers to enter contracts include conditioning employment; implied authority to require arbitration. | Held: NKADD acted ultra vires; KRS 336.700(2) expressly bars conditioning employment on agreeing to arbitrate, so the arbitration agreement is void. |
| Whether KRS 336.700(2) applies to NKADD (a public agency) | Snyder: definition of "employer" includes agencies; statute applies to public employers like NKADD. | NKADD: definition primarily contemplates private employers; statute should not restrict state agency powers. | Held: KRS 336.700(2) applies to NKADD as an "agency"; prior precedent supports treating public entities within statutory employer definitions. |
| Whether the FAA preempts KRS 336.700(2) | Snyder: FAA does not preempt because the state statute does not single out arbitration; it forbids conditioning employment on waiving rights generally. | NKADD: FAA preempts state laws that discriminate against arbitration and makes arbitration agreements enforceable. | Held: FAA does not preempt KRS 336.700(2) here; the statute is a neutral anti-discrimination rule preventing conditioning employment on waiver of rights, not a rule targeting arbitration. |
Key Cases Cited
- Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017) (FAA preemption principles; equal-treatment principle for arbitration agreements)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that single out arbitration agreements for disfavored treatment)
- Madison County Fiscal Court v. Kentucky Labor Cabinet, 352 S.W.3d 572 (Ky. 2011) (public entities can fall within statutory definitions of "employer")
- Herndon v. Herndon, 139 S.W.3d 822 (Ky. 2004) (administrative agencies exercise only legislatively conferred authority)
- Stierle v. Sanitation Dist. No. 1 of Jefferson County, 243 S.W.2d 678 (Ky. 1951) (acts beyond statutory authority are ultra vires and void)