Legal Memorandum: Arbitration in Employment Contracts

Issue: Is the law limiting arbitration clauses in employment contracts preempted by the Federal Arbitration Act?

Area of Law: Alternative Dispute Resolution, Employee Law
Keywords: Arbitration clause; Employment contracts; Preemption by FAA
Jurisdiction: Virgin Islands
Cited Cases: None
Cited Statutes: 24 V.I.C. § 74a
Date: 03/01/2007

In 2002, the Virgin Islands Legislature added section 74a to Title 24 of the V.I. Code.  Section 74a provides:

§ 74a   Arbitration

(a)        Notwithstanding an employment contract that provides for the use of arbitration to resolve a controversy arising out of or relating to the employment relationship, arbitration may be used to settle such a dispute only if:

(1)        the employer or employee submits a written request after the dispute arises to the other party to use arbitration; and


(2)        the other party consents in writing not later than sixty (60) days after the receipt of the request to use arbitration.

(b)        An employer subject to this chapter may not require an employee to arbitrate a dispute as a condition of employment.

24 V.I.C. § 74a (2004).

Subpart (b) was enacted out of concern for the plight of unemployed men and women seeking employment in the Virgin Islands, in order to make certain that overreaching prospective employers would not take advantage of those desperate for work.  To require signing an arbitration agreement as a condition of employment constitutes economic coercion.  Section 74a(b) is consistent with the Federal Arbitration Act and is an expression of Virgin Islands law as to what constitutes unconscionability.

However, in Moore and St. Rose v. HOVENSA, LLC, No. CIV. 460/2004 (Mar. 15, 2005), the court rejected the plaintiff’s argument that § 74a applied to the defendant’s motion to compel arbitration, finding § 74a preempted by […]

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