Ruling limits reach of arbitration in employment cases

PHOENIX – The Arizona Supreme Court dealt employers a blow Wednesday, ruling that state law can't be used to require workers to settle employment disputes through arbitration.

The Supreme Court's unanimous ruling Wednesday decided the scope of an exemption in state law requiring courts to order arbitration in cases where parties have a valid arbitration agreement.

One party in the case argued the exemption for disputes between employers and employees only applied to employees covered by collective bargaining agreements.

The Supreme Court ruled otherwise, saying that the exemption in the state's 1962 arbitration law is broader, applying to all disputes between employees and employers.

Arbitration clauses require that disputes be resolved by an independent referee or arbitrator.

Supporters of arbitration say it is a quicker, cheaper and easier way to settle disputes, while detractors say the agreements can put some parties at a disadvantage.

The Supreme Court's ruling represents "a different view of the world" from what had been assumed in Arizona legal circles, said John Doran, an attorney who represents employers.

"I'm confident that this opinion will get the Legislature's attention.

It will certainly get the attention of every Arizona employer."

Wednesday's ruling was in favor of North Valley Emergency Specialists, a firm formed by approximately 20 physicians and other employees who left Team Physicians of Arizona Inc.

in 2002.

Team Physicians sued the former employees, alleging violation of non-complete contract clauses, improper solicitation of clients and interference with contracts.

The former employees' contracts with Team Physicians had clauses making all disputes subject to arbitration, and Team Physicians won a court order from a trial judge to put the dispute before an arbitrator.

North Valley objected, appealing the issue of whether the case is subject to arbitration.

The Supreme Court acknowledged that Arizona has a public policy of generally encouraging arbitration but said its ruling was the result of "clear language" of the broad exemption in a state law enacted in 1962.

"If the Legislature had wanted to continue to exclude from the act only those employer-employee arbitration agreements that were collectively bargained, as it had done in the past, no change in statutory language would have been needed," Justice Michael D.

Ryan wrote for the court.

Stanley Lubin, a lawyer who represents North Valley and who typically represents employees, said the ruling apparently means that contract provisions for mandatory arbitration generally can't be enforced in state courts.