Department of Defense Issues Interim Final Rule on Mandatory Arbitration

On May 19, 2010, the U.S. Department of Defense (DOD) issued in Interim Final Rule barring the use of mandatory arbitration by contractors receiving federally appropriated funds in excess of one million dollars. Section 8116 of the DOD's appropriation for 2010, offered by Senator Al Franken of Minnesota, restricts the use of mandatory arbitration agreements when using funds appropriated or otherwise made available by this DoD Appropriations Act to award contracts that exceed $1 million. It allows the Secretary of Defense to waive applicability to a particular contractor or subcontractor, if determined necessary to avoid harm to national security. Specifically, federally appropriated funds may not be used " if the contractor restricts its employees to arbitration for claims under title VII of the Civil Rights Act of 1964, or 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. ...''

On February 17, 201, the department issued an instruction to the contracting agencies about the Franken Amendment. The Memorandum entitled "Class Deviation to Implement Additional Contractor Requirements and Responsibilities Implementing Mandatory Arbitration Agreements" instructs agencies to bar the use of Fiscal Year 2010 funds unless the contractor agrees not to enter into any agreement with employees or independent contractors that requires the employees or contractors to resolve any claims arising out of Title VII of the Civil Rights Act of 1964 through mandatory arbitration. To see the DOD instruction, go to: http://www.acq.osd.mil/dpap/policy/policyvault/USA000476-10-DPAP.pdf.

The DOD Interim Final Rule may be found at: http://frwebgate5.access.gpo.gov/cgi-bin/TEXTgate.cgi?WAISdocID=702255149300+5+1+0&WAISaction=retrieve