Thursday, May 31, 2018

2019 NDAA - Mandatory Arbitration Agreements

Nine or so years ago, the 2010 NDAA (National Defense Authorization Act) added new restrictions on the awards of contracts over $1 million to contractors that require employees to resolve disputes through arbitration. The provision was implemented in the DFARS (DoD FAR Supplement)at Section 222.74. Specifically, the policy states:
Departments and agencies are prohibited from entering into contracts greater than $1 million unless the contractor agrees not to enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that he/she agree through arbitration any claim under the Civil Rights Act or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention
The policy also applies to existing agreements. In other words, contractors must agree to not enforce the provisions of agreements entered into prior to the effective date of the policy.

Fast forward nine years and now Congress wants to see how the Defense Department is monitoring this prohibition.

A provision in the 2019 NDAA will require (if passed) the Defense Department to provide a briefing to the House Armed Services Committee on steps the Department has taken to ensure compliance with DFARS 222.74 concerning the restrictions on contractor use of mandatory arbitration agreements.

The briefing must include steps taken by DoD to ensure it does not fund contracts with contractors that require, as a condition of employment, that employees enter into agreements to resolve certain claims and torts through arbitration. The briefing must also include steps taken by DoD to ensure the restriction is flowed-down to subcontractors. There's a third requirement to the briefing - potential ways for DoD to determine the prevalence of mandatory arbitration by DoD contractors compared to contractors that do not do business with DoD.

We suspect that other than the normal Representations and Certifications delineated in SAM (System for Award Management), DoD is not doing much at all to determine compliance with this provision. Wonder what prompted the House to include this provision? Evidently there must be some indication out there that contractors continue to insist upon mandatory arbitration agreements to settle complaints. A whistleblower perhaps?

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