More employers are using mandatory arbitration agreements with employees in order to avoid delays and perceived biases with the traditional court system. The Federal Arbitration Act (FAA) extends wide latitude to parties to agree to forgo lawsuits in favor of private arbitration. Last week, the U.S. Supreme Court unanimously agreed that the FAA does not deprive federal courts of jurisdiction to confirm arbitration agreements.

In Jules v. Andre Balazs Properties, a former employee sued his employer for discrimination following a COVID-19-related layoff. The federal district court stayed the lawsuit and referred it to arbitration based on the agreement between the parties. After the arbitrator ruled in favor of the employer and assessed costs against the employee, the employer filed a motion in federal court to confirm the award. The federal court granted the motion, and the plaintiff appealed this decision to the Second Circuit Court of Appeals. He argued that once the district court referred the matter for arbitration, it lacked jurisdiction to confirm the arbitrator’s decision.

The Supreme Court affirmed the Second Circuit’s rejection of this argument. The court used the legislative history of the FAA to confirm that there was never an intent for mandatory arbitration to deprive federal courts of jurisdiction over post-arbitration motions. Federal courts can either confirm or vacate the arbitrator’s decision and thereby conclude the matter.

This opinion avoids a scenario where parties to an arbitration are deprived of the ability to use federal courts to contest or dispute the arbitration decision. While federal courts are limited in their ability to disturb the arbitrator’s decision, parties to that arbitration can use the court system to address alleged improprieties or to enforce that arbitration decision.

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