Hunton Employment & Labor Perspectives

Arbitration provisions are increasingly a focus in non-competition litigation these days and are being used in a variety of strategic ways to assist with the enforcement of non-competition clauses.  The United States Supreme Court recently held that an arbitrator, not a state court, should have decided the enforcement of non-competition clauses.  The employer filed for arbitration when two of its employees, who had arbitration provisions in their employment contracts, went to work for a competitor.  The employees filed a state court action challenging the enforcement of the arbitration and non-competition clauses.  The state court held that the non-compete clause was unenforceable but that the arbitration agreement was enforceable.  The United States Supreme Court found that where an enforceable arbitration agreement exists, the arbitrator, not the state court, has the authority to determine whether the non-competition clauses were enforceable.  “Our cases hold that the FAA forecloses precisely this type of ‘judicial hostility towards arbitration,'” the court said, citing AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011).