Is this arbitration clause enforceable in Illinois, and can an Illinois statute that forbids waiver of a claim defeat it?
Under the Illinois Uniform Arbitration Act a written agreement to arbitrate an existing controversy, or a written contract provision to arbitrate future controversies, is valid, enforceable and irrevocable save on such grounds as exist for the revocation of any contract, and the Act now names failure to comply with the Workplace Transparency Act as one such ground. Where the contract evidences a transaction involving interstate commerce, in Carter the supreme court held the anti-waiver provisions of the Nursing Home Care Act are not 'grounds as exist at law or in equity for the revocation of any contract' under § 2 of the FAA, because FAA § 2's savings clause preserves only general contract defences (lack of mutuality, lack of consideration, fraud, duress, unconscionability) that can truly apply to any contract. On a motion to compel, if the opposing party denies the agreement exists "the court shall proceed summarily to the determination of the issue so raised" and order arbitration if it finds for the movant (710 ILCS 5/2(a)), and "An order for arbitration shall not be refused on the ground that the claim in issue lacks merit or bona fides" (§ 2(e)). The same section runs the other way for a party resisting arbitration: on application the court "may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate", that issue is tried forthwith and summarily, and the stay is ordered if the movant wins while arbitration is ordered if the opponent does (§ 2(b)); and any action or proceeding involving an arbitrable issue "shall be stayed" once an order for arbitration or an application for one has been made, severable issues apart (§ 2(d)).
The trap
The live Illinois defeater is employment, not the arbitration statute. Under the Workplace Transparency Act a UNILATERAL condition of employment that requires an employee to waive, arbitrate or otherwise diminish a claim related to an unlawful employment practice is against public policy and void to the extent it denies a substantive or procedural right; it survives only as a MUTUAL condition, in writing, with actual, knowing and bargained-for consideration and the acknowledgments listed in 820 ILCS 96/1-25(c) (five in the text before P.A. 104-320, six after it, the sixth being the right to engage in concerted activity to address work-related issues), and failing (c) raises a rebuttable presumption that the clause is unilateral. As amended by P.A. 104-320 (the published row's source line reads 'eff. 1-1-26') subsection (b) expressly reaches clauses that shorten the limitation period, apply non-Illinois law to an Illinois employee's claim, or require a venue outside Illinois. The Workplace Transparency Act's own application section bounds all of this: the Act applies to contracts entered into, modified, or extended on or after its effective date (source line P.A. 101-221, eff. 1-1-20) and does not apply to collective bargaining agreements entered into in and subject to the Illinois Public Labor Relations Act or the National Labor Relations Act (820 ILCS 96/1-10). Second trap: § 1 of the UAA subjects a patient-provider arbitration agreement for injury or death claims, 'but not including intentional torts', to the Health Care Arbitration Act. One thing about the Workplace Transparency Act is missing from every rule that cites it, and it is the drafting answer rather than a footnote: § 1-25 voids the clause as a UNILATERAL condition of employment, not outright. § 1-25(c) provides that “Any agreement, clause, covenant, or waiver that is a mutual condition of employment or continued employment may include provisions that would otherwise be against public policy as a unilateral condition of employment or continued employment, but only if the agreement, clause, covenant, or waiver is in writing, demonstrates actual, knowing, and bargained-for consideration from both parties, and acknowledges the right of the employee or prospective employee to:” and then lists six rights the writing must acknowledge, reporting a good-faith allegation of unlawful employment practices to a government agency, reporting criminal conduct, participating in a proceeding about unlawful employment practices, making truthful statements or disclosures required by law, requesting or receiving confidential legal advice, and engaging in concerted activity about work-related issues. § 1-25(d) then supplies the sanction: “Failure to comply with the provisions of subsection (c) shall establish a rebuttable presumption that the agreement, clause, covenant, or waiver is a unilateral condition of employment or continued employment that is governed by subsection (a) or (b).” And § 1-25(e) adds that nothing in the section prevents an employee or prospective employee and an employer from negotiating and bargaining over the terms, privileges and conditions of employment. So in Illinois the move is not to delete the clause but to make it mutual, written, supported by actual bargained-for consideration on both sides and carrying the six acknowledgments; miss any of that and subsection (d) puts it back under (a) or (b).
14 authorities
- statute710 ILCS 5/1enactment date not established
The words that state the rule
A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract, including failure to comply with the terms of the Workplace Transparency Act
- statute820 ILCS 96/1-25enactment date not established
The words that state the rule
Any agreement, clause, covenant, or waiver that is a unilateral condition of employment or continued employment and requires the employee or prospective employee to waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice to which the employee or prospective employee would otherwise be entitled under any provision of State or federal law, including that which purports to shorten the applicable statute of limitation, apply non-Illinois law to an Illinois employee's claim, or require a venue outside of Illinois to adjudicate an Illinois employee's claim, is against public policy, void to the extent it denies an employee or prospective employee a substantive or procedural right or remedy related to alleged unlawful employment practices
The words that state the rule
we hold that the public policy behind the antiwaiver provisions of sections 3 — 606 and 3 — 607 of the Nursing Home Care Act are not “grounds as exist at law or in equity for the revocation of any contract” within the meaning of section 2 of the FAA
The words that state the rule
the purpose of this savings clause is to preserve general contract defenses such as lack of mutuality, lack of consideration, fraud, duress, unconscionability, and the like, that can truly apply to any contract.
- statute820 ILCS 96/1-10enactment date not established
The words that state the rule
(c) This Act applies to contracts entered into, modified, or extended on or after the effective date of this Act.
- statute820 ILCS 96/1-10enactment date not established
The words that state the rule
This Act does not apply to any collective bargaining agreements that are entered into in and subject to the Illinois Public Labor Relations Act or the National Labor Relations Act.
- statute820 ILCS 96/1-25enactment date not established
The words that state the rule
Any agreement, clause, covenant, or waiver that is a mutual condition of employment or continued employment may include provisions that would otherwise be against public policy as a unilateral condition of employment or continued employment, but only if the agreement, clause, covenant, or waiver is in writing, demonstrates actual, knowing, and bargained-for consideration from both parties, and acknowledges the right of the employee or prospective employee to:
- statute820 ILCS 96/1-25enactment date not established
The words that state the rule
Failure to comply with the provisions of subsection (c) shall establish a rebuttable presumption that the agreement, clause, covenant, or waiver is a unilateral condition of employment or continued employment that is governed by subsection (a) or (b).
- statute710 ILCS 5/1enactment date not established
The words that state the rule
except that any agreement between a patient and a hospital or health care provider to submit to binding arbitration a claim for damages arising out of (1) injuries alleged to have been received by a patient, or (2) death of a patient, due to hospital or health care provider negligence or other wrongful act, but not including intentional torts, is also subject to the Health Care Arbitration Act.
- statute710 ILCS 5/2enactment date not established
The words that state the rule
(a) On application of a party showing an agreement described in Section 1, and the opposing party's refusal to arbitrate, the court shall order the parties to proceed with arbitration, but if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised and shall order arbitration if found for the moving party, otherwise, the application shall be denied.
- statute710 ILCS 5/2enactment date not established
The words that state the rule
(e) An order for arbitration shall not be refused on the ground that the claim in issue lacks merit or bona fides or because any fault or grounds for the claim sought to be arbitrated have not been shown.
- statute820 ILCS 96/1-25enactment date not established
The words that state the rule
(1) report any good faith allegation of unlawful employment practices to any appropriate federal, State, or local government agency enforcing discrimination laws; (2) report any good faith allegation of criminal conduct to any appropriate federal, State, or local official; (3) participate in a proceeding related to unlawful employment practices, including any litigation brought by any federal, State, or local government agency or any other person who alleges that the employer has violated any State, federal, or local law, regulation, or rule; (4) make any truthful statements or disclosures required by law, regulation, or legal process; (5) request or receive confidential legal advice; and (6) engage in concerted activity to address work-related issues.
- statute710 ILCS 5/2enactment date not established
The words that state the rule
(b) On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. That issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party. If found for the opposing party, the court shall order the parties to proceed to arbitration.
- statute710 ILCS 5/2enactment date not established
The words that state the rule
(d) Any action or proceeding involving an issue subject to arbitration shall be stayed if an order for arbitration or an application therefor has been made under this Section or, if the issue is severable, the stay may be with respect thereto only. When the application is made in such action or proceeding, the order for arbitration shall include such stay.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.