Arbitration provisions can be an important tool to add more certainty to the dispute resolution process and potentially reduce costs. In Virginia, employers should carefully consider whether and how to craft arbitration agreements in the wake of groundbreaking new laws passed last year creating new employment rights that will be litigated in state courts. Reed Smith’s previous blog posts on those new laws can be found here, here, and, here.
Recently, the United States Court of Appeals for the Fourth Circuit in Beckley Oncology Assocs. v. Abumasmah, No. 19-1751, 2021 U.S. App. LEXIS 10152 (4th Cir. Apr. 8, 2021) ruled on an issue of first impression that provides guidance to employers as they consider whether to require their employees to enter into arbitration agreements.
Background of the case: Dr. Rami Abumasmah, a former oncologist at Beckley Oncology Associates (BOA) filed an arbitration action against BOA asserting he was owed bonuses pursuant to his employment agreement. The arbitrator awarded Dr. Abumasmah $167,030 and BOA subsequently filed a complaint in federal district court to vacate the arbitration award. The applicable arbitration provision, however, stated that the arbitrator’s decision “shall be final and conclusive and enforceable in any court of competent jurisdiction without any right of judicial review or appeal.” The District Court confirmed the award and held that the “clause prohibiting judicial review of the arbitration award was unenforceable” under the Federal Arbitration Act (FAA). BOA then appealed.
The Fourth Circuit decision: The “validity of an appellate waiver in an arbitration agreement under the FAA [was] a matter of first impression” for the Fourth Circuit. The Fourth Circuit, relying on Tenth Circuit and Ninth Circuit decisions, noted that the parties to an arbitration agreement are entitled to only a “minimum level of due process” in the form of a single judicial review of an arbitration award. In this case, the Fourth Circuit held that BOA received that minimum level of due process at the district court level. The Fourth Circuit further held that nothing in case law or under the FAA precluded an appellate waiver (as opposed to a general judicial waiver), noting that the FAA states that an “appeal may be taken.” See 9 U.S.C. § 16(a)(1)(D) (emphasis added). By limiting further litigation, the Fourth Circuit held that the parties’ agreement to waive appellate review furthered the FAA’s policy objectives – to treat arbitration as an alternative to litigation, not its precursor.
What is the takeaway? While parties in the Fourth Circuit may not waive judicial review of arbitration awards altogether, they may waive appellate review. Given the recent wave of new employment laws and the Fourth Circuit’s decision, Virginia employers should carefully consider implementing arbitration agreements for their employees with an appellate waiver. As the Fourth Circuit held, arbitration should be viewed as an alternative to litigation. In order to ensure that employers are getting the benefit of that alternative and in an effort to keep costs down, employers should have an attorney draft or carefully review their arbitration agreements for compliance and best practices.
For more information on developments in these areas or their impact upon your business, please contact Betty Graumlich at email@example.com, Mark Passero at firstname.lastname@example.org or the Reed Smith lawyer with whom you normally work.