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New Bill In Nevada Assembly Seeks To Ban Arbitration In Employment Agreements

Volume 8, Issue 6
April 1, 2009

Currently before the Nevada Assembly is a new bill, A.B. 381 that would invalidate arbitration provisions in certain employment agreements. Many employers have incorporated arbitration provisions into employment contracts and confidentiality/non-compete contracts so that the parties are required to arbitrate any dispute arising between them under those contracts. Some employers have also used such provisions to require the arbitration of employment practices claims, such as discrimination claims. A.B. 381 seemingly seeks to eliminate these options for employers, leaving parties to employment contracts without an effective, efficient and budget-friendly form of alternative dispute resolution.

As presently drafted, A.B. 381 would make a "consumer arbitration agreement" ("CAA") void and unenforceable except to the extent federal law provides for its enforceability. A CAA is defined as "a standardized contract where one party drafts a provision that requires disputes arising after the signing of the contract to be submitted to binding arbitration and the other party is a consumer." The bill defines "consumer" as one who purchases real or personal property, goods, services or credit for personal, family or household purposes, but also includes one who is "an employee of or seeks employment with the other party to the [arbitration] agreement."

The proposed bill exempts arbitration provisions in collective bargaining agreements. However, the bill as drafted appears to invalidate arbitration provisions in individual employer-employee agreements, i.e. an employment contract for a senior executive or a non-compete agreement with a mid-level manager.

The text of A.B. 381, which has several additional purposes related to "consumer" arbitration, can be found at leg.state.nv.us/75th2009/Bills/AB/AB381.pdf. The bill was introduced on March 16, 2009 and has been referred to the Assembly's Committee on Commerce and Labor. As it is considered by the Legislature, it will be important to determine the true intent and breadth of this proposed and potentially significant change to Nevada law.

To review a listing of the members to the Assembly's Committee on Commerce and Labor, see: http://leg.state.nv.us/75th2009/Committees/A_Committees/CMC.cfm.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.