The 11th Circuit Puts a Major New Dent in the ARmor Surrounding Arbitration Awards

Delfina Montes worked for Shearson, Lehman Brothers, Inc. and was terminated. She believed she deserved overtime pay and filed a lawsuit. Shearson wanted the case to go to arbitration instead. This decision reestablished the rule of law in arbitration and helps both employers and employees. During the arbitration, Montes showed evidence that she was made to fill out fake time cards saying she didn’t work more than 40 hours a week, even though she actually did. Shearson tried to argue that she was exempt from overtime pay, but the evidence showed that her job duties didn’t qualify for any exemptions. Her supervisor and replacement both testified that she didn’t have the authority or time for supervisory duties, which is needed for the exemptions. The arbitration panel heard from an expert who used to work for the U.S. Department of Labor. He said that based on all the evidence, Montes should not be considered exempt from certain labor regulations. Shearson did not have any experts to argue against him. We were asked to ignore the law and make a decision based on what seemed fair and right, rather than following the rules. The company argued that the law wasn’t fair in this case and asked us to ignore it. Surprisingly, the panel agreed with the company and decided in their favor without giving a reason. After losing in arbitration, Montes went to court to try and overturn the decision. The court said it’s really hard to do that, but Montes appealed to a higher court anyway. Four years later, the higher court decided to reverse the earlier decision and Montes won. The 11th Circuit court decided that an arbitration award can be vacated if there is a “manifest disregard of the law.” This means that the arbitrators deliberately ignored the law in their decision. This is a narrow ground for vacating an arbitration award, but it is now available in the 11th Circuit. In the case of Montes v. Shearson Lehman, the court found that the arbitrators ignored the law in their decision, so the award was vacated. This decision allows for some challenges to arbitration injustices, but only in specific circumstances. The court has said that it won’t tolerate lawyers encouraging the arbitration panel to break the law. In the past, arbitration decisions were usually respected, but now there are clear rules about what lawyers and arbitrators can’t do. However, people who go to arbitration are still at the mercy of the arbitrators, unless it’s obvious that the arbitrators knew the law and chose to ignore it. If you go to court instead, you have the right to appeal a decision you don’t agree with, which is not the case with arbitration. When arbitrators don’t follow the law, it can be hard for employees and employers to make fair decisions. In a case like Montes v. Shearson Lehman, the court said that if an employer’s records are wrong or missing, the employer has to prove the employee’s hours are not accurate. But even with this small protection, it might be better for both sides to go to court, where there are rules to follow and mistakes can be fixed.

Source: https://www.floridabar.org/the-florida-bar-journal/the-11th-circuit-puts-a-major-new-dent-in-the-armor-surrounding-arbitration-awards/