WASHINGTON — The U.S. Supreme Court ruled Monday that the Oklahoma Supreme Court failed to follow federal law last year when it got involved in a contract dispute that should have been settled by an arbitrator.
In an unsigned decision, the nation's high court reversed the Oklahoma court and ordered new proceedings in a case involving two former employees of an oil and gas well service company.
The employees had contracts with stipulations regarding working for the company's competitors, and the contracts required disputes to be resolved by an arbitrator. After the employees quit the company and went to work for a competitor, they were served with a demand for arbitration
The workers filed suit in Johnston County, but a judge there ruled that their contracts had valid arbitration clauses. The Oklahoma Supreme Court, however, took the workers' appeal and, according to the U.S. Supreme Court, failed to adhere to the Federal Arbitration Act and high court decisions regarding the act.
Oklahoma's high court determined that it could use a state law to review the contracts and then, last November, declared the noncompetition clauses “void and unenforceable as against Oklahoma's public policy.”
The U.S. Supreme Court vacated that action on Monday and ruled that the state court must abide by the Federal Arbitration Act, “which is the Supreme Law of the Land.”
“State courts rather than federal courts are most frequently called upon to apply the Federal Arbitration Act … including the Act's national policy favoring arbitration,” the U.S. Supreme Court decision states.
“It is a matter of great importance, therefore, that state supreme courts adhere to a correct interpretation of the legislation. Here, the Oklahoma Supreme Court failed to do so. By declaring the noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, the state court ignored a basic tenet of the Act's substantive arbitration law.”