Skip to content

Resources

U.S. Supreme Court enforces Oklahoma arbitration agreement

published in Oklahoma Employment Law Letter | December 1, 2012

By Charles S. Plumb

Some employers have been putting agreements in place that require employees to submit employment disputes to mandatory arbitration rather than file a lawsuit in state or federal court. Courts have been receptive to arbitration agreements regarding employment and have enforced them. On November 26, the U.S. Supreme Court reached a decision involving an Oklahoma employer that strengthened the enforceability of mandatory arbitration of employment disputes.

Facts

Nitro-Lift provided oil and gas well operators in Oklahoma, Texas, and Arkansas with services to enhance mineral production. Eddie Lee Howard and Shane Schneider worked with Nitro-Lift and signed confidentiality and noncompetition agreements. The agreements included a clause requiring the parties to submit any disputes to mandatory arbitration under the rules of the American Arbitration Association.

Eventually, Howard and Schneider left their jobs with Nitro-Lift to work for a competitor. When Nitro-Lift claimed a violation of the confidentiality and noncompetition agreements and requested arbitration, the former employees filed a lawsuit and asked a Johnson County, Oklahoma, state court to find that the noncompetition provision was unenforceable under Oklahoma law. The state court dismissed their suit, and they appealed to the Oklahoma Supreme Court. Although the supreme court found the arbitration clause valid, it proceeded to rule that the noncompetition provision was unenforceable under Oklahoma law.

Court’s decision

Nitro-Lift asked the U.S. Supreme Court to review the Oklahoma court’s ruling, and the Supreme Court overruled the state court’s decision. In doing so, the Court added further support to the enforceability of mandatory arbitration clauses in the context of employment agreements.

The U.S. Supreme Court emphasized that national policy favored arbitration of disputes. The validity of an arbitration clause may be initially challenged in court. In this particular case, however, the Oklahoma court overstepped its authority when it found the arbitration clause was enforceable but went on to overrule the enforceability of the noncompetition provision. Once it found that the arbitration clause was valid, it should have left it to an arbitrator to decide whether the noncompete agreement was enforceable and applicable.

Bottom line

This new decision by the U.S. Supreme Court increases the likelihood of future courts enforcing arbitration clauses in employment relationships.