The United States Supreme Court has agreed to address a potentially impactful matter involving the Federal Arbitration Act (FAA) that requires both state and federal courts to respect private arbitration agreements created between parties. These parties can range from employers to their employees. In numerous cases, employers leverage arbitration agreements to circumvent what is often perceived as costly, time-consuming, and occasionally prejudiced courts and juries. This was opened up for examination by Parker Poe Adams & Bernstien LLP and is now under review by the Supreme Court.
The interest of the Supreme Court in the present issue pivots on an exception delineated within the FAA. Particularly, this exception relates to ‘contracts of employment of seamen, railway employees, or any other class of workers engaged in foreign or interstate commerce.’ This clause, historically, has been interpreted differently by various courts with the majority holding a narrow perspective that the exception applies to only transportation workers actively involved in interstate commerce.
If the Supreme Court rules in favor of a broader interpretation of the exclusion, a significant proportion of arbitration agreements may become unenforceable. The implications of this could be increasingly crucial for employers, particularly those who frequently operate using arbitration agreements as their preferred mode of dispute resolution.
In summary, this pending Supreme Court ruling has the potential to redefine the scope of the FAA and to influence the enforceability of numerous arbitration agreements. Legal professionals, specifically those involved in labor and employment law, would do well to monitor this case closely as its verdict could critically shape the prevailing landscape of arbitration in employment contracts.