FINRA Arbitrators and Federal Courts Consider If A Terminable-At-Will Employee Can Be Wrongfully Terminated

[W]arfield's claim for "wrongful termination without just cause" (Doc. No. 3-3, p. 3) has no basis in North Carolina law because no such cause of action exists for "at-will" employees. See Kurtzman v. Applied Analytical Indus., 493 S.E.2d 420, 422 (N.C. 1997), rehearing denied, S.E.2d 594 (N.C. 1998) ("North Carolina is an employment-at-will state. This Court has repeatedly held that in the absence of a contractual agreement between an employer and an employee establishing a definite term of employment, the relationship is presumed to be terminable at the will of either party without regard to the quality of performance of either party. There are limited exceptions. First, as stated above, parties can remove the at-will presumption by specifying a definite period of employment contractually. Second, federal and state statutes have created exceptions prohibiting employers from discharging employees based on impermissible considerations such as the employee's age, race, sex, religion, national origin, or disability, or in retaliation for filing certain claims against the employer. Finally, this Court has recognized a public-policy exception to the employment-at-will rule."). Warfield has never alleged or argued that his termination was based upon an impermissible consideration or that Defendants violated a "public policy."

[T]he Defendants made the Panel aware of the clear, well-established law in North Carolina and the Fourth Circuit, and the Panel chose to disregard the that law. The arbitrator's Award therefore demonstrates manifest disregard and must be vacated. As noted earlier, the Court is mindful that vacating an arbitration award should be a "rare occurrence." However, under the circumstances of this case, the Court finds it appropriate.

(1) the disputed legal principle is clearly defined and is not subject to reasonable debate; and (2) the arbitrator refused to apply that legal principle.

The problem for ICON is that Warfield has cited cases holding that the presence of an arbitrability clause governing an employment dispute implies for-cause termination protections, notwithstanding a state law at-will doctrine to the contrary. Thus, the Eighth Circuit has held: 

Even accepting that Kansas is an employment-at-will state . . . PaineWebber's relationship with Agron under the oversight of the NASD [FINRA's predecessor] contemplated the use of the arbitration procedure as a means of settling employment-related disputes. This process necessarily alters the employment relationship from at-will to something else . . . . Accordingly, the arbitration panel had the power to determine whether the firing was justified. 

Agron, 49 F.3d at 352 (emphasis added); see also Liang, 653 F.2d at 312 ("Shearson's further reply that Liang's employment was terminable at will is without merit. It has been held repeatedly that an agreement to arbitrate disputes about employee discharges implies a requirement that discharges be only for 'just cause.' "). 

We express no opinion on the persuasiveness of Agron and Liang; the point is that they exist, and Warfield presented them to the arbitrators. ICON has not cited, either to the arbitrators or to us, any North Carolina case rejecting the specific proposition that the arbitrability of an employment relationship implies for-cause protections. We have previously explained that in the absence of clearly on-point and controlling precedent, the fact that courts disagree on a particular legal question weighs against second-guessing an arbitrator's award. . . .

Moreover, the award contained no explanation of how the arbitrators determined that Warfield could bring a claim for wrongful termination without just cause. As ICON acknowledged, the parties could have requested an explained decision from the arbitrators but apparently did not do so. Oral Argument at 34:37-35:27, Warfield v. ICON Advisers, Inc. (4th Cir. Jan. 26, 2022) (No. 20-1690), https://www.ca4.uscourts.gov/OAarchive/mp3/20-1690-20220126.mp3; see also FINRA Rule 13904(g). 

Of course, "arbitrators are not required to explain their reasoning." Wachovia Secs., LLC, 671 F.3d at 481. But when arbitrators do not provide any explanation, we cannot simply impute manifest disregard. See MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 862 (4th Cir. 2010) ("It is well settled that arbitrators are not required to disclose the basis upon which their awards are made and courts will not look behind a lump-sum award in an attempt to analyze their reasoning." (collecting cases)). Instead, when arbitrators do not explain how they reached a given result, the party seeking vacatur "must show that it would be manifest disregard of the law to" reach that outcome by each and every conceivable route. Interactive Brokers, 969 F.3d at 444. 

ICON has not done so here. As we have explained, it would not have been manifest disregard of the law to determine that the relevant language in Raymond James is either inapplicable or dicta, nor to determine that North Carolina had not specifically rejected the Agron-Liang theory. Because the arbitrators had these routes available and we do not know that they did not take them, ICON has not met its exceedingly heavy burden of establishing that the arbitrators manifestly disregarded the law.

In this case, as in almost all manifest disregard cases, the sky-high standard of judicial review is the beginning and the end of our analysis. Neither North Carolina law nor our decision in Raymond James established "binding precedent requiring a contrary result" from the outcome that the arbitrators reached. Jones, 792 F.3d at 403. And even if there were such a binding precedent, ICON has not met its heavy burden of showing that the arbitrators knew of and "refused to heed" that precedent. . . .

• FINRA
• ICON
• Warfield
• Wrongful Termination Manifest Disregard of the Law
• Manifest Disregard
• Arbitration
• 4Cir
• WDNC
• BrokeAndBroker
• Bill Singer