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New Law Prohibits Mandatory Employment Arbitration Causes for Military Contractors

    Client Alerts
  • January 08, 2010

The Department of Defense's recent spending bill signed by President Obama contains a provision intended to allow employees of military contractors to have their day in court.  The law resulted from a highly publicized case last year, where a civilian employee of a contractor was prohibited from filing suit after she alleged that she was raped by co-workers while working in Iraq.  The contractor cited a provision in her employment agreement that required mandatory arbitration of the claim.

The new law prohibits defense contractors from using mandatory arbitration for most employment-related claims.  The new law takes effect immediately, and will also apply to military subcontractors in June.  Contracts and subcontracts under $1 million are exempt from the requirement.

This legislation likely serves as a preview of efforts in the next Congressional terms to limit or eliminate use of mandatory arbitration agreements in employment for all businesses.  Trial lawyers and some consumer groups cite the clauses as unfairly limiting access to courts by aggrieved employees.  Employers counter that the clauses limit abusive litigation and runaway jury situations.