On Saturday, the Senate approved by a vote of 88 to 10 the final version of the FY 2010 Defense Appropriations Bill (H.R. 3326). Embedded in this $636 billion spending measure is the contentious amendment submitted by Sen. Al Franken (D-Minn.) that restricts federal contractors and subcontractors working on large defense projects funded by the appropriations bill from requiring their employees and independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate first agreed to include a limit on arbitration in the appropriations bill in October. The House passed the amended spending bill last Wednesday.

President Obama is expected to sign the final spending bill, which adds the following provision:

Sec. 8116. (a) None of the funds appropriated or otherwise made available by this Act may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration 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; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration 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.

Additionally, the bill specifies that as of 180 days after the bill’s enactment, contractors – in order to receive defense contracts – must certify that their subcontractors have also agreed to the arbitration restrictions with respect to their own employees and independent contractors who perform work on the contract. Subcontractors subject to these restrictions are those holding subcontracts exceeding $1 million to perform work related to the federally funded defense project.

The arbitration provisions do not apply to agreements that cannot be enforced in this country. Moreover, in limited circumstances, the Secretary of Defense may waive these requirements on a case-by-case basis, if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is no longer than necessary to avoid such harm.

The appropriations bill also extends the expanded unemployment benefits, including increased payouts and longer duration of benefits, through February 28, 2010, and extends from nine to 15 months the 65 percent premium COBRA subsidy provided by the American Recovery and Reinvestment Act (“ARRA” or “Economic Stimulus”) to eligible unemployed workers. The measure also extends the COBRA coverage eligibility date from December 31, 2009 to February 28, 2010 for employees otherwise eligible for the COBRA subsidy.