Federal Arbitration Act Preemption of State Public-Policy-Based Employment Arbitration Doctrine: An Autopsy and an Argument for Federal Agency Oversight
60 Pages Posted: 11 Apr 2014 Last revised: 7 May 2016
Date Written: April 9, 2014
This article examines the negative impact that the U.S. Supreme Court’s recent jurisprudence interpreting the Federal Arbitration Act (“FAA”) will have on the ability of states to promote the public interests that ground state employment regulation and argues for a reordering of the relationship between federal arbitration law and state public-policy-based employment arbitration doctrine. The article proceeds in three steps. First, the article demonstrates that the U.S. Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion and 2013 decision in American Express Co. v. Italian Colors Restaurant together extinguish the state effective-vindication and public policy exceptions to FAA application. In doing so, this case law preempts a significant amount of state employment arbitration regulation and, thus, enables employers to use employment arbitration agreements imposed on employees as a condition of employment as a means to evade the strictures of state employment regulation. Second, the article argues that, as a normative matter, the FAA should allow for consideration of the public interest in determining whether an employment arbitration agreement will be enforceable. Thus, in practice, the FAA should allow for consideration of the need for a worker to effectively vindicate her state statutory employment rights and for consideration of her ability to do so in arbitration. Finally, the article suggests a way forward. Specifically, the article proposes that Congress limit the FAA’s preemptive scope by carving out an exception to section 2 of the FAA that would allow states to regulate predispute employment arbitration agreements subject to the approval of the U.S. Department of Labor or a similar body. Pursuant to this reform, a state would be authorized to propose employment arbitration regulations tailored to the specifics of that state’s employment statutes. A federal overseer with expertise in employment law would be charged, however, with evaluating any such proposed employment arbitration regulation by balancing the federal interest in promoting arbitration agreements as written with the state interest in vindicating state statutory employment rights.
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