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Illinois Employers Need to know About The New Laws Governing Employee Arbitration Clauses

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Illinois Employers Need to know About The New Laws Governing Employee Arbitration Clauses

Illinois has new restrictions with respect to all employment agreement, including written arbitration agreements. As part of the Illinois Workplace Transparency Act (820 ILCS 96et.al.) the Illinois Uniform Arbitration Act (710 ILCS 5/1) has been amended to limit employment arbitration agreements that restrict an employee’s rights.

Illinois Uniform Arbitration Act: New Restriction on Arbitration Agreements in Employment Contracts

The Amended Illinois Arbitration Act still generally provides that a written agreement to submit a controversy to arbitration between the parties is valid and enforceable but carves out an exception for failure to comply with the Workplace Transparency Act:

A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract, including failure to comply with the terms of the Workplace Transparency Act, except that any agreement between a patient and a hospital or health care provider to submit to binding arbitration a claim for damages arising out of (1) injuries alleged to have been received by a patient, or (2) death of a patient, due to hospital or health care provider negligence or other wrongful act, but not including intentional torts, is also subject to the Health Care Arbitration Act [710 ILCS 15/1 et seq.] (emphasis added).

Illinois Transparency in the Workplace Act: Restrictions on Arbitration Agreements

Under the Illinois Transparency in the Workplace Act, Conditions of Employment or Continued Employment, portion, 820 ILCS 96/1-25, employment agreements are still permitted to have arbitration clauses, but any arbitration clause will be void if it requires an employee to, as a condition of employment, unilaterally waive, arbitrate or diminish rights or benefits related to unlawful employment practices:

(b) Any agreement, clause, covenant, or waiver that is a unilateral condition of employment or continued employment and requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee or prospective employee would otherwise be entitled under any provision of State or federal law, is against public policy, void to the extent it denies an employee or prospective employee a substantive or procedural right or remedy related to alleged unlawful employment practices, and severable from an otherwise valid and enforceable contract under this Act.

820 ILCS 96/1-25 (emphasis added).

The Act provides, however, that mutually agreed upon terms in employment may be valid so long as the agreement is a “mutual condition of employment or continued employment”, is in writing, demonstrates actual, knowing and bargained-for consideration from both the employer and the employee and acknowledges the right of the employee or prospective employee to:

  • report any good faith allegation of unlawful employment practices to any appropriate federal, State, or local government agency enforcing discrimination laws;
  • report any good faith allegation of criminal conduct to any appropriate federal, State, or local official;
  • participate in a proceeding with any appropriate federal, State, or local government agency enforcing discrimination laws;
  • make any truthful statements or disclosures required by law, regulation, or legal process; and
  • request or receive confidential legal advice.

Under the Illinois Transparency Act, there is also a rebuttable presumption that the agreement is unconscionable if the agreement does not provide for all of the above-listed terms.

Effective Date of Restrictions on Employment Agreement

Both the Illinois Uniform Arbitration Act and the Illinois Transparency Act become effective January 1, 2010.

Employers need to be even more mindful of the terms of their employment contracts and make sure that they are in compliance with these new laws. Otherwise, they may find that their arbitration agreements are not enforceable.

Kristin Tauras practices employment law at McKenna Storer. Please contact her if you have questions regarding the application of the Illinois Transparency Act or any other employment matters.

Categories Employment Law



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