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Legal Memorandum: Arbitration Provisions in Employment Agreements

Issue: Under the law of the Virgin Islands, are employment agreements subject to arbitration?

Area of Law: Business Organizations & Contracts, Employee Law
Keywords: Employment agreement; Arbitration provision; Validity and enforceability
Jurisdiction: Federal, Virgin Islands
Cited Cases: None
Cited Statutes: 1 V.I.C. § 4; Restatement (Second) of Contracts § 178(1); 24 V.I.C. § 74a
Date: 05/01/2004

The validity and enforceability of arbitration provisions are determined under state contract principles.  Thus, when applicable, state contract law principles may invalidate arbitration provisions to the same extent those principles could be used to strike any contract provision.  Doctor’s Assocs. Inc. v. Casarotta, 517 U.S. 681, 686-87 (1996).

Virgin Islands law looks to the Restatement (Second) of Contracts for its contract principles.  1 V.I.C. § 4.  Section 178(1) of that Restatement provides that “[a] promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.”  Restatement (Second) of Contracts § 178(1). 

A Virgin Islands statute provides the applicable public policy.  See 24 V.I.C. § 74a.  The statute provides:

(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 after the dispute arises to the other party to use arbitration; and

 

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

 

(b)  An employer subject to this chapter may not require an employee […]

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