No “Mulligan” for Employers: How Binding Arbitration Agreements Can Cut Both Ways

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Many Florida businesses require employees to agree to arbitration employment disputes as a condition of employment. However, as the 11th Circuit recently affirmed, when an arbitration provision requires arbitration as the final decisionmaker for disputes – both the employer and employee will be stuck with an arbitrator’s outcome.  While arbitration is often viewed as “employer friendly,” the Gherardi v. Citigroup case illustrates that is not always the case.

FINRA Panel Orders Citigroup to Pay $3,452,000 to Ex-Broker

The U.S. 11th Circuit Court of Appeals recently reaffirmed this principle in a decision, Gherardi v. Citigroup Global Markets, Inc., where an arbitration panel ordered an employer to pay a multi-million award to a former employee. In challenging the decision, the employer argued the arbitrators exceeded their authority. The 11th Circuit disagreed, finding that even if that was the case, the employer made its own bed by requiring arbitration of “all” disputes.

The background facts of this case are relatively straightforward. Citigroup employed a securities broker in its Miami office for approximately 20 years. The employee was considered a “star performer” according to court records. However, Citigroup management also concluded the employee had engaged in “inappropriate and abusive behavior towards colleagues.” After issuing multiple warnings, Citigroup ultimately decided to fire the employee.

The employee decided to challenge his termination via arbitration. There was no dispute an arbitration agreement existed. Under the terms of an arbitration policy appended to Citigroup’s employee handbook, “all employment-related disputes” between the employee and Citigroup had to be arbitrated by FINRA, the private corporation that serves as a private regulator for the securities industry.

The case went to arbitration and the FINRA panel returned an award of $3,452,000 for the employee after concluding he was wrongfully terminated. The employee then moved in federal court to confirm the arbitration award. The judge, however, instead granted Citigroup’s motion to vacate the award.

Both Citigroup and the district court believed that the arbitration panel could not legally award damages for wrongful termination because the fired broker was considered an “at-will” employee. Normally, an at-will employee cannot seek damages for wrongful termination under Florida law. Indeed, Citigroup and the employee had a separate Employment Agreement that expressly stated he could be “terminated at any time for any reason or no reason, not otherwise prohibited by law.”

Nevertheless, the 11th Circuit concluded that since Citigroup agreed to arbitrate “all” employment-related disputes, it could not now challenge the arbitrator’s application of the law in court. Even if the arbitration panel made a clear “interpretive error,” the appellate court explained that it could not “override” that mistake without violating federal law, which favors private arbitration of disputes when agreed to by the parties involved. In short, the 11th Circuit said Citigroup “does not get a mulligan in federal court” just because it is unhappy with an arbitration process it required in the first place.

Get Advice About Arbitration Agreements

If you have questions or concerns regarding your own company’s use of arbitration agreements or an agreement you signed, please contact an experienced Florida employment law attorney today.

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