US Supreme Court Reaffirms Favor for Arbitration
The United States Arbitration Act, which is more commonly referred to as the Federal Arbitration Act, turned 93 years old in February of this year. Despite the act’s long track record of enforcing agreements between employers and their employees, it continues to be under attack.
The most recent attack came in a group of cases recently decided by the United States Supreme Court in Epic Systems Corporation v. Jacob Lewis (Epic Systems). In each of the cases that make up Epic Systems, an employer and employee entered into an arbitration agreement that called for individual arbitration to resolve disputes between the parties. Despite the individualized arbitration agreements, the employees sought to end-around arbitration by arguing the National Labor Relations Act gave them a right to engage in a “concerted activity” and bring a class or collective action against the employer for violations of the Fair Labor Standards Act.
Judge Neil Gorsuch saw through this attempted coup of the nation’s arbitration laws, noting that until recently, courts have typically agreed that arbitration agreements must be enforced according to their terms. In fact, the original arbitration act was enacted in a response to a perception by Congress that the judiciary was extraordinarily hostile to arbitration.
Time and again, Congress has reinforced that arbitration agreements offer more informal, faster and cheaper solutions for all parties involved. The Supreme Court has said more than once that the Federal Arbitration Act establishes a liberal policy on the federal level that favors arbitration agreements. It is because of this command, according to Judge Gorsuch, that the Court must continue to allow employers and employees to contract how they wish to resolve disputes and not allow courts to override valid arbitration agreements.
While the Epic Systems case is a real win for arbitration agreements and employers’ ability to enforce them, most decisions regarding the validity and enforceability of arbitration agreements are dealt with at the state level.
Despite a federal policy favoring arbitration, Missouri courts have shown a continued hostility to enforcing such agreements, and leave employers with a moving target as to what will be enforced when an employee seeks to end-around arbitration. Cases out of both Eastern and Western District appellate courts have struck down arbitration agreements, finding new ways each time to allow employees and trial attorneys to pursue their claims in court.
The most recent battle in Missouri seems to be over the delegation authority of an arbitration agreement to allow the arbitrator to make initial determinations over the enforcement of an agreement. Two recent decisions seem to be turning to favor such provisions, as both the Missouri Supreme Court and the Western District Court of Appeals have held that incorporating rules of the American Arbitration Association allows delegation of the initial arbitrability question to go to the arbitrator. (See State ex rel. Pinkerton v. Fahnestock, 531 S.W.3d 36, 39 (Mo. banc 2017), and Latenser v. Tarmac International, Inc., WD81089, (E.D. App. March 20, 2018).
While these recent cases are a positive sign for employers, the broader history of Missouri courts and their hostility to arbitration remains. The Missouri legislature would be wise to reaffirm their affinity for the quick, fair and efficient way that arbitration helps solve claims and codify Latenser to show employers that arbitration agreements will have a similarly-favored standing in Missouri as they do on the federal level.