Advisories & Insights

New legislation makes arbitration agreements between employers and employees voidable unless certain requirements are met

August, 2007

On June 27, 2007, the Oregon Legislature passed Senate Bill 248, which adds several onerous requirements in order for an employer to enforce an arbitration agreement against a former employee. The governor signed the bill on August 6, 2007 and the new legislation will become effective January 1, 2008.

Many employers seek to have employees agree to arbitrate – rather than litigate in civil court – disputes arising from the employment relationship. This legislation creates more procedural requirements for an employer to do so.

Changes to Oregon Law Under Senate Bill 248

Senate Bill 248 amends Oregon's Uniform Arbitration Act in two important respects. The new legislation makes arbitration agreements between employers and employees voidable if they do not satisfy at least one of the following two statutory requirements.[1]

1. The employer must inform the employee in a "written employment offer" that an arbitration agreement is required as a condition of employment. The employee must receive this notification at least two weeks before the first day of employment in order for the notice to be valid.

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2. The arbitration agreement must be entered into on "subsequent bona fide advancement" of the employee.

If these requirements appear familiar, it is because they are similar to the new requirements for a valid non-competition agreement under Oregon law. The new requirements apply to all arbitration agreements entered into on or after January 1, 2008.

Unfortunately, for many if not most employers, the requirement that the employee be notified in a "written employment offer" at least two weeks before the first day of employment flies in the face of reality. Most hires, particularly of rank-and-file employees, take place on a shorter time frame and less formally than this. Each employer will, therefore, need to examine this issue and make a determination regarding how important arbitration agreements will be and whether the employer will want to modify its current practice – perhaps at an increased cost.

Conclusion

Now that Senate Bill 248 has been signed by the governor, it is critical for employers and HR professionals to work with legal counsel to update handbooks, policies and procedures to ensure the enforceability of arbitration agreements with employees. Please contact Bullivant Houser Bailey's employment attorneys if you need additional details or have any questions.