The U.S. Supreme Court recently limited when federal courts have the authority to confirm or vacate arbitration awards. The case is complex, but the ruling could affect employment-related arbitration disputes by expanding the role of state courts.
In Badgerow v. Walters, the high court was asked to decide whether a federal court can review an arbitration award when the only basis for federal jurisdiction is that the underlying dispute involved a federal question.
"This case involves a pretty obscure question about jurisdiction—the kind of question that understandably causes many non-lawyers' eyes to glaze over," said Chris Murray, an attorney with Ogletree Deakins in Indianapolis.
But the outcome has implications for businesses that use employment-related arbitration agreements. "Under the court's new decision, employers—and employees—will now more often be required to file their motions to confirm, modify or vacate arbitration awards in state rather than federal court," Murray explained.
Why does this matter to employers? Jesse Panuccio, an attorney with Boies Schiller Flexner in Washington, D.C., noted that employers generally tend to favor arbitration as an efficient and lower-cost method of resolving employment disputes. "Traditionally, state courts have been seen as more hostile to arbitration, so employers generally might favor federal court jurisdiction in these circumstances," he said.
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