Ok class, open up your employment contracts. Now before you sign it (or renew it), read every word. Did you see an arbitration provision? If so, please forget about going to court to dispute any disagreements in the contract. You will just waste precious time and money. The arbitrator is your judge and jury now. Accept it. Deal with it. It's the LAW!
Despite the fact that the US Supreme Court has educated state courts, federal district and appellate courts, and lawyers alike for decades now about the federal policy favoring arbitration (ever since the enactment of the Federal Arbitration Act
), lawyers and judges are still trying to circumvent the system. Normally, nothing beats but a failure but a try. But unfortunately the "try" usually just prolongs the failure in this instance.
The most recent case to tackle this issue is the case of Nitro-Lift Technologies, LLC v. Eddie Lee Howard et. al., decided November 26, 2012, which deals with two employees desperately attempting to circumvent that pesky arbitration clause in their covenant not to compete agreement with the employer.
In Nitro, Mr. Howard and Mr. Schneider entered into a non-compete agreement with Nitro-Lift that contained the following arbitration clause:
Any dispute, difference or unresolved question between Nitro-Lift and the Employee (collectively the “Disputing Parties”) shall be settled by arbitration by a single arbitrator mutually agreeable to the Disput ing Parties in an arbitration proceeding conducted in Houston, Texas in accordance with the rules existing at the date hereof of the American Arbitration Associ ation.
Despite this clear and unambiguous language, the employees did not want to adhere to the employer's demand for arbitration to deal with the dispute over the alleged breach of the non-compete agreement. Instead, the employees took their case to the Oklahoma courts. After all, Oklahoma residents won't get bullied by Texans on the football field or in a jurisdictional battle over where to resolve contract disputes!
The Supreme Court of Oklahoma resolved the dispute in favor of the employees, holding that the non-compete agreement was unenforceable under Oklahoma statutory law, thus making it against public policy to enforce an arbitration provision within the unenforceable contract. While this argument may sound persuasive on first blush, it has been attempted on multiple occasions without much success.
The US Supreme Court took the case on cert to once again remind the states that although normally the specific governs the general when considering statutory interpretation, the same is not true when you have a specific state statute conflicting with a general federal statute. In this situation, the federal statute trumps (preempts) the more specific state statute. The Court then reminded us all that if the agreement calls for arbitration and an attack on the validity of the agreement does not specifically attack the validity of the arbitration provision itself, the case is arbitrable and it is for an arbitrator, and not a judge, to decide whether the non-compete agreement complies with Oklahoma law and thus whether or not it is enforceable.
Ok, let's recap. Attacks on the validity of a contract as a whole
which contains an arbitration provision is for the arbitrator to decide. If you think the contract was fraudulent in its' inception and thus voidable, it is still arbitrable
. Even if you believe the contract is illegal on its' face and are certain that illegal contacts are null and void and, therefore, the contract and any provisions therein are also null and void
, the issue is still one for an arbitrator and not a judge to decide.
Any questions? Only frustrations? Ahhh, good, my work here is done. Class dismisse