SCOTUS Reigns Supreme On Issue Of Arbitration Of Non-Compete Agreements

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Some states specifically allow non-compete agreements. Of those states, some have legislation that provides guidelines to parties to a non-compete agreement regarding enforceability. Other states take the approach that agreements restricting employment are void and unenforceable as against public policy. So here’s a situation on which the United States Supreme Court recently rendered an opinion (see Nitro-Lift Technologies, L.L.C. v. Eddie Lee Howard, et al., US Supreme Court Case No. 11-1377, November 2012):

Nitro-Lift Technologies contracts with oil and gas operators to provide services that enhance production. Nitro-Lift entered into confidentiality and noncompetition agreements with its employees that contained an arbitration clause. The arbitration clause referred any dispute, difference or unresolved question to single arbitrator arbitration in Houston, Texas using AAA rules. Two of the employees subject to the confidentiality and noncompetition agreements left the company and went to work for a competitor. During their employment, the former employees had worked in Texas, Arkansas and Oklahoma. The employer served the former employees with a demand for arbitration, to which the former employees responded with a lawsuit in Oklahoma state court seeking a judicial declaration that the noncompetition agreement was null and void. The Oklahoma lower court dismissed the lawsuit, finding that the contract contained a valid arbitration clause dictating that the arbitrator, and not the trial court, should resolve the parties’ disputes.

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Topics:  Arbitration, Arbitration Agreements, Federal Arbitration Act, Non-Compete Agreements, Preemption, SCOTUS

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Conflict of Laws Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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