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The U.S. Supreme Court has rules that the FAA preempts certain state judicial forum laws.

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March 2008

ARBITRATION UPDATE


Federal Arbitration Act Preemption



By Christopher W. Olmsted, Esq.

Arbitration agreements have become increasingly tricky to enforce in California. A recent U.S. Supreme Court case offers some aid to employers.

Certain state laws require that some employment disputes must be brought in a judicial or administrative forum. What happens when the employer and employee have signed an arbitration agreement stating that disputes must instead be heard before an arbitrator?

In Preston v. Ferrer, the Supreme Court held that the Federal Arbitration Act (FAA) supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative.

The case involved television judge Alex Ferrer, known as “Judge Alex.” His attorney sued him for agent commissions. Judge Alex petitioned the California Labor Commissioner for a determination that the contract was invalid under the Talent Agencies Act because Preston had acted as a talent agent without the required license. Preston demanded arbitration.

After a round of state court proceedings, the U.S. Supreme Court ruled that the FAA trumped the California Labor Code. The parties agreed to arbitration, and to arbitration they must go, notwithstanding state law to the contrary.

Further, the question of whether or not the arbitration agreement is enforceable is a question for the arbitrator to decide, not a state judge or administrative agency judge.

While this case may help employer wrest cases away from the Labor Commissioner or state court in limited circumstances, it does not change the tricky maze of procedural and substantive requirements needed to create enforceable employment arbitration agreements. Employers ought to carefully examine California case law to ensure that their arbitrations agreements will force employees to go to arbitration rather than a jury trial.

More Legal Update articles.
Download entire March Legal Update in PDF format.


This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2008 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.





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