Fourth Circuit Says Arbitration Clause Can Prevent Appellate Review

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Some employers concerned about the risks and expenses that accompany employment litigation instead require their workers to agree to mandatory arbitration of employment claims. Last week, the Fourth Circuit Court of Appeals (which includes North Carolina, South Carolina, and Virginia) broadened the applicability of such agreements, upholding an arbitration clause that prevents appellate judicial review of the arbitrator’s decision.

In Beckley Oncology Associates, Inc. v. Abumasmah, a medical group required physicians to sign arbitration agreements providing 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." Following an arbitration award relating to payments under a separation agreement, the employer filed a complaint to vacate the arbitration award in federal court on the grounds that it disregarded plain language in the physician’s employment contract. The district court agreed to hear the appeal on the grounds that the prohibition against any judicial review was unenforceable, but it upheld the arbitrator’s award.

The employer appealed this decision to the Fourth Circuit, which affirmed the award because the arbitration agreement included an enforceable waiver of appellate review. Noting this was a decision of first impression in the Fourth Circuit, the court concluded that appellate waivers in arbitration agreements are enforceable, as long as the agreement allows an initial legal review by the district court. The court noted the strong public policy expressed in the Federal Arbitration Act in favor of efficient dispute resolution.

The Fourth Circuit then noted that appellate waivers are common in different legal proceedings, such as criminal plea agreements. As long as the parties are granted minimal due process through an option for judicial review of the arbitrator’s decision, they may agree to waive additional court proceedings. In this case, the unenforceable prohibition against initial judicial review was severable and could be discarded without affecting the appellate waiver.

Employers located in the Fourth Circuit that use mandatory arbitration agreements may wish to add language similar to that used in this case if they want to limit post-arbitration legal proceedings.

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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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