Dive Brief:

• The 4th U.S. Circuit Court of Appeals reversed a lower court's ruling that arbitrators disregarded North Carolina law when they awarded a former employee more than $1 million for being terminated without just cause (Warfield v. ICON Advisers, No. 20-1690 (4th Cir., Feb. 24, 2022)).
• The plaintiff was hired as a securities wholesaler by Icon Advisers in 2017. By the end of the year, however, the company terminated him. He entered arbitration, claiming that he was terminated without just cause. He argued that the requirement "that disputes over his employment relationship had to be resolved by arbitration implied that he could only be fired for cause." The arbitrators agreed and awarded the plaintiff $1,186,975.00 in damages.
• The plaintiff asked a district court to enforce the award, but the court granted the company's request to vacate it. The plaintiff appealed the ruling before the 4th Cir., and the appellate court reversed the lower court's ruling.

Dive Insight:

Throughout its analysis, the 4th Cir. repeated several times the difficulty implicit in achieving an overturned award established in arbitration. "Convincing a federal court to vacate an arbitral award is a herculean task," the court said. 

The scope of review when examining an arbitrator's decision is "among the narrowest known at law," the court explained, citing a 1998 opinion. "To allow full scrutiny of such awards would frustrate the purpose of having arbitration at all — the quick resolution of disputes and the avoidance of the expense and delay associated with litigation."

The court decided that ICON failed to meet the "heavy burden" it imposed on itself in claiming the arbitrators ignored North Carolina law and 4th Cir. precedent. "Neither North Carolina law nor our decision in Raymond James established 'binding precedent requiring a contrary result' from the outcome that the arbitrators reached," the court opined. "And even if there were such a binding precedent, ICON has not met its heavy burden of showing that the arbitrators knew of and 'refused to heed' that precedent."

The court's decision came a couple of weeks after Congress passed the Ending Forced Arbitration for Sexual Assault and Sexual Harassment Act — the #MeToo bill. The bill applies only to claims of sexual harassment, but it calls to mind broader petitions to end mandatory arbitration and guarantee workers' their day in court.

Worker advocates tend to argue against mandatory arbitration, saying that it favors employers. "Research has found that employees are less likely to win arbitration cases and they recover lower damages in mandatory employment arbitration than in the courts," wrote Alexander J.S. Colvin in a 2015 Economic Policy Institute report.