Jottings By An Employer's Lawyer

Wednesday, February 26, 2003

Alabama and the Federal Arbitration Act


Just before Christmas I noted the Alabama Supreme Court's decision in Potts v. Baptist Health System and the high standard for finding the FAA applicable. In that case a hospital did so by showing up to 90% of the materials and equipment that a nurse used in her work traveled in interstate commerce. Just how difficult that task is going to be in many employment cases is shown by last week's decision in Ex Parte David Webb. A divided Supreme Court granted a writ of mandamus, reversing a lower court's order compelling arbitration. The reason for granting the writ was that the FAA was not applicable. The Court summed up its view succinctly:
The parties to the contract containing the arbitration provisions were an Alabama natural person, Webb, and an Alabama domiciliary corporation, Bill Penney Motor Company. The transaction evidenced by the contract was Webb's performing menial chores in a cleanup shop in Alabama. The alleged assault cannot be deemed a transaction evidenced by Webb's employment contract. Bill Penney Motor Company has not submitted any evidence that Webb's employment or chores substantially, or even detectably, affected any of the contracts or transactions between Bill Penney Motor Company and persons or entities outside Alabama.
If this is the standard, it seems likely that many arbitration agreements required as a condition of employment in Alabama may not be enforced. At a minimum, employers' counsel will have to work to make a very focused showing that the FAA is applicable.

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