Those of us who work in labor law frequently have to work in the realm of arbitration, but mandatory arbitration provisions are also prevalent in employment agreements, requiring employees to have their cases heard in the (presumptively) less expensive, time-saving forum.  The U.S. Supreme Court recently provided clarity to situations when an employee (or former employee) brings a lawsuit against an employer, and the employer seeks to compel arbitration based on the terms of an employment agreement.  In Smith v. Spizzirri, the Court held that when a lawsuit involves an arbitrable dispute and a party has requested a stay of the court proceeding pending arbitration, the court is compelled to stay the proceedings, but not allowed to dismiss the action.

The plaintiffs in this case were current and former delivery drivers for the respondents.  The employees sued in state court, alleging violations of both federal and state employment laws.  After the case was removed to federal court, the respondents moved to compel arbitration and dismiss the suit.  The employees then conceded that all of their claims were arbitrable, but argued that the Federal Arbitration Act (FAA) required the District Court to stay the action pending arbitration rather than having it dismissed entirely.  The District Court issued an order compelling arbitration and dismissing the case without prejudice, meaning the plaintiffs could have brought suit again.

The plaintiffs appealed and the Ninth Circuit affirmed.  The Supreme Court granted certiorari because there was a split in circuits on the question of whether the case needed to be dismissed.

The language of the FAA reads that when an issue in a suit is subject to arbitration the court “shall on application of one of the parties stay the trial…until such arbitration has been had in accordance with the terms of the agreement…”

The Court found this language to be quite clear.  It did not matter that all of the plaintiffs’ claims belonged in arbitration, a stay was still required.  The Court’s finding that a stay was required was further bolstered by the fact that when arbitration is compelled, parties are unable to appeal the court’s decision until arbitration is completed.  This supports Congress’s desire, through the creation of the FAA, to move parties out of court and into arbitration as quickly as possible.

Finally, while it is the intent for cases to be resolved through arbitration, the Court described the “supervisory role” that the courts have over arbitration, in that courts may appoint an arbitrator, enforce subpoenas, and facilitate recovery of arbitration awards.  With that, the decision of the lower courts was reversed.

While this decision gets into some of the nitty gritty of arbitration and the rare cases where parties bring arbitrable disputes to courts, it is important to understand how courts will be treating cases that should be resolved through arbitration.  In this case, the employer had an ironclad arbitration agreement, but the plaintiffs were still able to, at least, file a complaint in court, and have the case overseen by the district court while the claims proceeded through arbitration.  If you, or your organization, need assistance navigating the arbitration process, whether with a union or individual employee, contact Wiley Reber Law, for arbitration experience that works.