## Facts

- The Northern Kentucky Area Development District (NKADD) was a government entity created under Kentucky law to administer publicly funded social programs in an eight-county area of Northern Kentucky.
- Danielle Snyder worked for NKADD as an employee.
- During Snyder’s employment, NKADD required employees to sign an arbitration agreement as a condition of employment/continued employment.
- The arbitration agreement required arbitration of any employment-related dispute between the employee and NKADD.
- NKADD informed employees that if they did not accept the arbitration agreement, they would be terminated.
- Snyder signed the arbitration agreement.
- Snyder later sued NKADD in Kentucky circuit court, asserting claims under the Kentucky Whistleblower Act and the Kentucky Wages and Hours Act.
- NKADD moved to compel arbitration under the agreement, relying on the Federal Arbitration Act (FAA).
- The trial court denied the motion to compel, ruling that the arbitration agreement violated KRS 336.700(2) and was unenforceable.
- The Kentucky Court of Appeals affirmed, agreeing that KRS 336.700(2) barred conditioning employment on an agreement to arbitrate and concluding the FAA did not preempt the statute.
- The Supreme Court of Kentucky granted discretionary review to address FAA preemption and the enforceability of the arbitration agreement.

## Issues

1. Does KRS 336.700(2) render unenforceable an arbitration agreement that an employer requires an employee to sign as a condition of employment or continued employment?
2. Does the Federal Arbitration Act preempt KRS 336.700(2) as applied to invalidate such an employer-required arbitration agreement?

## Decision

- The Supreme Court of Kentucky held that NKADD’s arbitration agreement violated KRS 336.700(2) because NKADD conditioned Snyder’s continued employment on her agreement to arbitrate disputes.
- The court held that, as a result, the arbitration agreement was unenforceable under Kentucky statutory law.
- The court held that the FAA did not preempt KRS 336.700(2) on these facts because the statute does not single out arbitration agreements or bar voluntary arbitration agreements.
- The court affirmed the Court of Appeals’ judgment (affirming the trial court’s denial of the motion to compel arbitration) and remanded for further proceedings.

## Legal Principles

- KRS 336.700(2) prohibits an employer from requiring, as a condition or precondition of employment, that an employee or applicant “waive, arbitrate, or otherwise diminish” an existing or future claim, right, or benefit available under Kentucky or federal law.
- An arbitration agreement obtained by conditioning employment or continued employment on the employee’s acceptance falls within KRS 336.700(2) and is unenforceable as a matter of Kentucky statutory law.
- The FAA preempts state rules that discriminate against arbitration agreements, including laws that bar arbitration of particular claims or impose special burdens on arbitration that do not apply to contracts generally.
- A state statute is not preempted by the FAA merely because it can invalidate an arbitration agreement; preemption turns on whether the statute targets arbitration or treats arbitration agreements worse than comparable agreements.
- KRS 336.700(2) operates as an employment anti-discrimination rule aimed at coercive conditions of employment and applies to arbitration, waivers, and other agreements that reduce employment-related rights; it does not prohibit voluntary arbitration agreements.

## Conclusion

In Northern Kentucky Area Development District v. Snyder, the Supreme Court of Kentucky held that an employer may not condition employment or continued employment on an employee’s agreement to arbitrate employment disputes because KRS 336.700(2) forbids requiring employees to waive, arbitrate, or otherwise reduce statutory rights as a condition of the job; the court also held the FAA did not preempt KRS 336.700(2) as applied, so NKADD could not compel arbitration and the case returned to the trial court for further proceedings.


Northern Kentucky Area Development District v. Snyder, 2018 WL 4628143 (2018)