News

Supreme Court ruling bolsters use of mandatory arbitration

by Charles S. Plumb

Employers requiring employees to submit disputes to mandatory arbitration rather than filing a lawsuit got a boost from a November 26 U.S. Supreme Court ruling in an Oklahoma case.

In the case, two employees of Nitro-Lift, a provider of services to oil and gas well operators, left their jobs to work for a competitor. The two had signed confidentiality and noncompetition agreements that included a clause requiring the parties to submit disputes to mandatory arbitration.

The employer claimed the two violated the confidentiality and noncompetition agreements and requested arbitration, but the former employees filed a suit asking a state court to find the noncompetition provision unenforceable under Oklahoma law.

Eventually, the state supreme court ruled the arbitration clause valid but then ruled that the noncompetition provision was unenforceable. The employer asked the U.S. Supreme Court to review the state court’s ruling. The federal high court overruled the state court’s decision, adding support to the enforceability of mandatory arbitration clauses.

The U.S. Supreme Court emphasized that national policy favors arbitration, and although the validity of an arbitration clause may be initially challenged in court, the state court in this case should have left the question of the enforceability of the noncompetition agreement to the arbitrator.

Charles S. Plumb is an editor of Oklahoma Employment Law Letter and a partner with McAfee & Taft in Tulsa. He can be reached at charlie.plumb@mcafeetaft.com.