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Legal Memorandum: Agreement to Arbitrate Workplace Injury Claims

Issue: Are agreements to arbitrate workplace injury claims valid under the laws of the Virgin Islands?

Area of Law: Employee Law, Workers Compensation Insurance
Keywords: Arbitration agreement; Workplace injury claims
Jurisdiction: Federal, Virgin Islands
Cited Cases: 923 F.2d 1062; 654 A.2d 1375; 516 A.2d 772; 429 A.2d 388; 387 Pa. Super. 630
Cited Statutes: 24 V.I.C. § 284; Restatement (Second) of Contracts § 309;
Date: 11/01/2004

Pursuant to 24 V.I.C. § 284, rights under the Workers’ Compensation Act constitute the only remedy an injured employee has against his or her employer.  Consequently, any attempt by contract to provide the employer with additional rights, such as the right to arbitrate a claim against an employee for work-related injuries, is void ab initio.

Section 309 of the Contracts Restatement provides that such a status presents a complete defense against any alleged beneficiary to the contract.  Subsection (1) states:  “A promise creates no duty to a beneficiary unless a contract is formed between the promisor and the promisee; and if a contract is voidable or unenforceable at the time of its formation [i.e., void ab initio] the right of any beneficiary is subject to the infirmity.”  Restatement (Second) of Contracts § 309 (1979) (emphasis added).  Comment (a) to this section makes clear that “the right of an intended beneficiary is created by contract, and in the absence of contract there is no such right.  Moreover, where there is a contract, the beneficiary’s right is subject to any limitations imposed by the law.”  Id., cmt. a (emphasis added).

The New Jersey Appellate Division, a jurisdiction that is governed by the Restatement, succinctly set forth this defense against a beneficiary in Allgor v. Travelers Ins. Co., 654 A.2d 1375 (N.J. Super. Ct. App. Div. 1995).  The court determined that there was a binding arbitration clause against the insured father.  Consequently, the same clause was also enforceable against […]

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