Fourth Circuit’s Reinstatement of $1.2 Million Award Highlights Risk of Arbitration Agreements
On February 24, 2022, the Fourth Circuit restored a $1,186,975.00 arbitration award for a North Carolina securities wholesaler (“Warfield”) who alleged that his former employer ICON Advisers Inc. (“ICON”) unlawfully fired him without cause. Warfield v. Icon Advisers, Inc., No. 20-1690, __ F.4th__, 2022 WL 552029, (4th Cir. Feb. 24, 2022).
The Plaintiff, Warfield, was previously employed by ICON and then fired without cause. Warfield, an at-will employee, could be legally terminated in North Carolina for any reason. Nevertheless, Warfield filed a claim in arbitration against ICON based on their FINRA arbitration agreement. The arbitration panel agreed with Warfield, ignoring state law which made him an at-will employee, and awarded almost $1.2 million. A district court later vacated the award finding the arbitrators ignored controlling state law when it awarded damages.
The Fourth Circuit reversed the district court and reinstated the award. Its holding was based on the significant amount of deference that is given to arbitration awards. In addition, other circuit courts have held that the existence of an arbitration agreement implies protections from being fired without cause. Significantly, the Eighth Circuit is one of those circuit courts of appeal. In summary, the Fourth Circuit held that ICON could not show that the arbitrators manifestly disregarded the law.
This case demonstrates that employers should carefully consider requiring employees to sign arbitration agreements as a condition of their employment.