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Supreme Court Reaffirms Applicability Of Federal Arbitration Act

Last week, the Supreme Court reaffirmed the authority of the Federal Arbitration Act ("FAA") over all state and federal claims within its purview. Facts: Eddie Lee Howard and Shane D. Schneider began working for Nitro-Lift Technologies, LLC, in 2008 and 2009, respectively. 273 P.3d 20, 24. During their employment, Howard and Schneider entered into confidentiality and non-competition agreements with Nitro-Lift that contained an arbitration clause. 2012 WL 5895686, at * 1. The arbitration clause in question stated "Any dispute, difference or unresolved question between Nitro-Lift and [the employees] shall be settled by arbitration..." Id.

Howard and Schneider resigned from Nitro-Lift in 2010, citing complaints over hours worked, compensation paid, and time off. 273 P.3d at 24. Following their resignations, the two former employees began working for a competitor of Nitro-Lift. 2012 WL 5895686, at * 1. Believing the former employees to be in violation of their non-compete agreements, Nitro-Lift served them with demands for arbitration. Id. In response, Howard and Schneider filed suit in Oklahoma District Court, seeking to have the Court declare the non-competition agreements void under state law. Id. The trial court dismissed the complaint, finding any determination regarding the enforceability of the non-compete agreement must be submitted to the arbitrator pursuant to the arbitration clause. Oklahoma Supreme Court: The Oklahoma Supreme Court determined that the existence of an arbitration agreement in an employment contract does not foreclose judicial review of the underlying agreement - in this instance, the non-competition agreement. 273 P.3d 20, 23. The Oklahoma Court's subsequent review of the non-compete agreements found them to be unenforceable as against Oklahoma public policy. Id. at 27-28. United States Supreme Court: In a per curiam decision, the Supreme Court found the Oklahoma Court disregarded relevant precedents regarding the FAA. 2012 WL 5895686, at * 2. Specifically, the Court recognized a national policy favoring arbitration, and that contracts that include arbitration provisions are valid, irrevocable, and enforceable, and that it is "well-settled" the FAA is applicable in both state and federal courts. Id. The Court then held, where a contract subject to the FAA is challenged, the issue is to be resolved by the arbitrator, and not by the judiciary. Id. Accordingly, the Supreme Court vacated the decision of the Oklahoma Supreme Court. Id. at *3. Application: The Supreme Court has issued no fewer than a dozen opinions concerning the FAA over the past four years. In doing so, the Court has consistently emphasized the applicability of the FAA to state and federal claims, and promoted a national policy in favor of such agreements. Unless Congress passes the Arbitration Fairness Act in the near future, expect employers to continue to include arbitration clauses in employment agreements. Visit for the latest developments in wage & hour, discrimination, and other employment law topics. AWR

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