Arbitration: Manifest disregard of the law

Will a court vacate an arbitration award because it is in manifest disregard of the law? Some courts will, but not in Oregon.

After terminating him, Patrick Johnson's former employer sought a preliminary injunction enjoining him from competing with the employer, soliciting its customers, or disclosing confidential information.

However, the matter went to arbitration. The arbitration panel found that the employer failed to prove Johnson breached the employment agreement, and that the employer willfully withheld wages and made wrongful deductions from Johnson's final paycheck.

The employer sought to vacate the arbitration award, arguing that the panel exceeded its authority in that the award was in manifest disregard for the law. The trial court refused to vacate the award, and the Oregon Court of Appeals affirmed. Floor Solutions v. Johnson (Oregon Ct App 10/19/2022) [PDF].

The court rejected the employer's argument that a manifest disregard of the law standard is incorporated into ORS 36.705(1)(d).

The court said, "because the Oregon legislature adopted the [Revised Uniform Arbitration Act (RUAA)] and did not codify the manifest disregard standard as a basis to vacate an arbitration award, we conclude that the legislature's intent was consistent with the RUAA drafters' intent."

Therefore, ORS 36.705(1)(d) does not incorporate a “manifest disregard of the law” standard as a basis to find that an arbitrator or arbitration panel exceeded its authority.