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Supreme Court Ruling May Affect Mandatory Arbitration for Some New Jersey Workers

Arbitration can allow the parties to a dispute to avoid the time and expense of litigation. More and more businesses are including clauses in consumer and employment contracts that require the parties to go to arbitration before filing a lawsuit. In some situations, arbitration may tend to favor businesses over individuals for numerous reasons. New Jersey lawmakers have attempted to limit the availability of mandatory arbitration contracts for certain claims, but several courts have ruled that the Federal Arbitration Act (FAA) precludes such laws. The FAA grants broad approval to arbitration contracts and arbitration awards. It also excludes certain groups of workers from its provisions. The U.S. Supreme Court recently ruled in favor of an airline employee who objected to arbitration of her overtime compensation claims. The ruling in Southwest Airlines Co. v. Saxon held that the employee is a “transportation worker” who is exempt from the FAA. If you have questions regarding arbitration in the workplace, contact a New Jersey employment lawyer to discuss your situation.

An arbitration proceeding resembles litigation in many ways. Both parties to a dispute must agree in advance to use arbitration. The parties present evidence and arguments to a neutral third party, known as the arbitrator. After considering both sides’ cases, the arbitrator may make an award that is similar to a verdict.

The FAA states that arbitration agreements are generally “valid, irrevocable, and enforceable,” except when they might not be under contract law principles like fraud or duress. If an arbitration agreement specifically states that the arbitrator’s award will be binding, the FAA limits courts’ authority to do anything other than confirm the award and enter it as a judgment, with few exceptions. Courts can only vacate or modify an arbitrator’s award with evidence of corruption, fraud, other forms of misconduct, or significant errors.

Section 1 of the FAA contains a residual clause stating that employment contracts for “seamen, railroad employees,” and other “workers engaged in foreign or interstate commerce” are exempt from the statute’s provisions. In 2001, the Supreme Court ruled in Circuit City Stores, Inc. v. Adams that the exemption is limited to “transportation workers.”

The plaintiff in the Saxon case worked as a ramp supervisor for a major airline. Her job involved training and supervising crews that load and unload cargo for passenger jets. She filed a putative class action under the Fair Labor Standards Act alleging that the airline was not paying ramp supervisors the correct amount of overtime. The airline sought to compel arbitration of the plaintiff’s individual case, noting that her employment contract included a mandatory arbitration clause. She argued that she and the other class members were “transportation workers” exempt from the FAA.

The Supreme Court agreed with the plaintiff. In a unanimous opinion, it held that the plaintiff belongs to a “class of workers engaged in foreign or interstate commerce.”

The court did not, however, agree with the plaintiff’s argument that the transportation worker exception should apply to all airline employees instead of just cargo loaders. While the court did not definitively rule against this interpretation of the statute, it did not endorse it, either. The opinion notes that § 1 of the FAA makes specific mention of “seamen,” which is a type of position in the maritime industry, rather than all maritime employees.

Disputes with employers over alleged wage and hour violations require skilled and experienced advocacy. The employment attorneys at the Resnick Law Group represent workers in New Jersey and New York in claims against unlawful workplace practices. Please contact us today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation to see how we can help you.

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