Originally from Dispute Resolution Journal

Author Bruce Meyerson argues that, for most employment disputes, the recent Arizona Supreme Court ruling that employment disputes are not covered by the state arbitration law will not apply due to preemption by the FAA.

For almost 80 years, the Arizona Arbitration Act has contained an exclusion for employment agreements “between employers and employees or their respective representatives.”1 Last year, Arizona’s highest court was called upon to determine whether that exclusion applied to all arbitration agreements between employers and employees, or just to arbitration agreements found in collective bargaining contracts. The court’s holding in North Valley Emergency Specialists, L.L.C. v. Santana 2 is straightforward. The court held that the exclusion exempts from the arbitration act “all arbitration agreements between employers and employees.”

Much has been made of this decision. Indeed, the headline about this case (“Employment Arbitration Dealt a Blow in Arizona”) in the previous issue of this Journal suggested that employment arbitration agreements may no longer be enforceable in Arizona. However, that is not likely to be the result of the court’s decision. The reason is that the court was not called upon to consider the relationship between the Arizona Arbitration Act and the Federal Arbitration Act (FAA), which applies to any “contract evidencing a transaction involving commerce.” I believe that U.S. Supreme Court decisions have made the FAA applicable to virtually every employment relationship. Thus, the ruling in North Valley Emergency Specialists should have an extremely limited impact because the Arizona exclusion for employment agreements will be preempted to the extent the agreement at issue is covered by the FAA.