4th Circuit OKs appellate waivers in arbitration agreements

Arbitration agreement provisions stating the arbitrator’s decision cannot be reviewed by an appellate judge are enforceable under the Federal Arbitration Act (FAA), the U.S. 4th Circuit Court of Appeals (whose rulings apply to all North Carolina employers) recently ruled for the very first time. In the case, the appellate court had been asked to set aside an arbitrator’s decision awarding compensation to a former employee for unpaid bonuses. If your employment agreements contain arbitration provisions or you’re considering incorporating them, you should take note of the following case and consider including language consistent with the court’s opinion (if you haven’t already done so).

Arbitration provisions primer

Generally speaking, if a dispute arises between an employer and an employee, it’s resolved through the state or federal court systems. Over time, however, it has become increasingly common for employers to require employees to sign provisions as part of their employment contracts stating all disputes will be resolved through arbitration.

The arbitration process is similar to, but not the same as, court proceedings. Arbitration generally involves lawyers representing each side, information being exchanged by the parties, and a hearing, during which evidence and witness testimony is presented. At the end of the process, an arbitrator, not a judge or jury, makes a final determination. Arbitrators are often attorneys (current or retired), former judges, or other individuals with relevant legal experience.