Supreme Court Rules Against Employee in 2011 suit

In a recent decision, the Supreme Court of Texas ruled against an employee who had successfully proven that her employer had discriminated against her. The case was Nafta Traders, Inc. v. Quinn, ___ S.W.3d ___ (Tex. 2011)(5/13/11).

After an employee brought a sex discrimination suit, her employer forced her to arbitration. When she prevailed, the employer sought to vacate the arbitration. The Texas Supreme Court ruled that, contrary to U.S. Supreme Court authority indicating that the grounds for vacating an award under the Federal Arbitration Act (which did not exist here) are exclusive, the parties can “agree” to provide for judicial review of an award. That “agreement” occurred in the form of language which the employer had put in the employee handbook.

In another departure from its usual rulings, the supreme court ruled that the Federal Arbitration Act did not “preempt” the state act, even though the court’s brand new interpretation of the state act yields a different result from federal law.

Since this new ruling means that arbitration will be more expensive and protracted, the court noted: “Parties agree to arbitration for reasons other than speed and cost, such as flexibility, privacy, and in some instances, expertise. . . . [W]hether arbitration reduces cost and delay at all is fiercely debated.”

An “arbitration agreement may be so one-sided as to be unconscionable, but the benefits or burdens of judicial review for reversible error fall to each side alike.” Here, the court did not find the agreement to be unconscionable.