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Supreme Court Upholds Mandatory Arbitration in Employment Contract

Proponents of mandatory arbitration clauses were given a victory in November when the U.S. Supreme Court vacated a decision by the Oklahoma Supreme Court in which the Oklahoma court had ruled that an employment non-compete agreement could be reviewed by a state court, despite an arbitration requirement in an employment contract. In Nitro-Lift Technologies, L.L.C. v. Howard, No. 11-1377, the Court issued a per curiam opinion on Nov. 26, 2012 and remanded the case back to Oklahoma.

“State courts rather than federal courts are most frequently called on to apply the Federal Arbitration Act (“FAA”), 9 U.S.C. 1 et seq., including the Act's national policy favoring arbitration. It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation,” wrote the Court. “Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the act's substantive arbitration law. The decision must be vacated.”

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