The U.S. Department of Defense (DoD) will issue a final rule (pdf) implementing section 8116 of the DoD Appropriations Act for Fiscal Year 2010, which restricts a contractor’s use of mandatory arbitration agreements in certain instances. Specifically, section 8116 bans contractors or subcontractors at any tier that receive funds appropriated by the Act for a contract in excess of $1 million from enforcing mandatory, pre-dispute agreements to arbitrate “any claim under title VII of the Civil Rights Act of 1964 or any 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.” After June 17, 2010, contractors are required to certify compliance by their subcontractors. The Secretary of Defense is permitted to waive the applicability of this prohibition to a particular contract or subcontract in the interest of national security. Additionally, the arbitration limitations do not apply to a contractor’s or subcontractor’s agreement with employees or independent contractors that cannot be enforced in the U.S., nor do they apply to the acquisition of commercial items, including commercially available off-the-shelf items.

The final rule adopts the interim rule issued in May 2010 with certain minor changes. Specifically, the final rule further explains the DoD waiver process and the conditions under which the DoD’s waiver authority will be exercised. The DoD’s waiver determination will “set forth the grounds for the waiver with specificity, state any alternatives considered, and explain why each of the alternatives would not avoid harm to national security interests.” The final rule is effective as of the date of publication in the Federal Register, which is scheduled for December 8, 2010.

Photo credit: Damir Cudic