In a non-employment law case, the U. S. Supreme Court issued a decision on March 25, 2008, that has implications for the arbitration of disputes about discrimination and other employee rights provided by statute.  The case is Hall Street Associates v. Mattel, which involved an arbitration agreement entered into after a dispute had arisen and been partially litigated.  The federal district court where the litigation was pending approved the agreement, which said in part:  “The United States District Court for the District of Oregon may enter judgment upon any [arbitration] award, either by confirming the award or by vacating, modifying or correcting the award.  The Court shall vacate, modify or correct any award: (i) where the arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous.”

I know that’s too much legalese, but it sounds pretty buttoned down, doesn’t it?  The parties agreed to it, and a court approved it.  So what was the problem?

The problem was that the scope of judicial review permitted by this agreement was greater than that provided by the Federal Arbitration Act.  So as not to provide even more legalese, I’ll resist the temptation to give you the exact language from the FAA.  Suffice it to say, the standard of FAA review is more narrow than that of the agreement in question.  Accordingly, said the Supreme Court, the agreement was no good.  In other words, the FAA rules when it comes to arbitration.

This decision is somewhat troubling in the employment law arena–at least, potentially so–because there is an increasing number of agreements out there between employers and employees containing arbitration clauses.  There is an increasing number of alternative dispute resolution (ADR) programs used by employers in an attempt to eliminate litigation as a means of resolving employment disputes.  These ADR programs usually provide arbitration as the final step in the program.

In light of the Court’s decision in Hall Street v. Mattel, do all these programs need to be redone?  Do arbitration agreements between employers and employees need to be rewritten?  Probably not, but all programs and all agreements need to be reviewed in light of this decision.  If you use arbitration agreements–if you have an ADR program–contact your lawyer and review what you have in light of this recent case.  A link to this case appears below.

http://www.supremecourtus.gov/opinions/07pdf/06-989.pdf