Arbitration Decision from 7th Circuit Leaves Split Among Appellate Courts
In a recent decision, the U.S. 7th Circuit Court of Appeals ruled that a health care software company was in violation of the National Labor Relations Act (NLRA) when it required its employees to waive their rights to pursue wage-and-hour claims in class actions. In the case, Lewis v. Epic Systems Corp., Lewis brought a claim in federal court against his employer, Epic Systems, asserting they had violated the Fair Labor Standards Act (FLSA) by depriving him and a few fellow employees of overtime pay. No. 15-2997, 2016 WL 3029464 (7th Cir. May 26, 2016). Epic Systems moved to dismiss the claim and compel individual arbitration, in light of an arbitration clause requiring groups of employees to bring any wage-and-hour claims against the company only through individual arbitration and prohibiting collective arbitration or class action. Id. Lewis claimed the arbitration clause was unenforceable because it violated Section 7 of the NLRA, which states that “employees shall have the right to… engage in…concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157. Epic Systems contended that the clause was enforceable under the Federal Arbitration Act (FAA). Id. Both the district court and the 7th Circuit agreed with Lewis. Id.
This decision directly opposes a decision from the 5th Circuit, leaving a split among the appellate courts and increasing the possibility that the Supreme Court will take up the issue. In 2013, the 5th Circuit overturned a National Labor Relations Board decision in D.R. Horton, Inc. v. N.L.R.B., and allowed employers to have these mandatory individual arbitration agreements under the FAA. 737 F.3d 344 (5th Cir. 2013). This split in decisions will leave a lot of uncertainty, and possibly more lawsuits, for employers not in those circuits who have or want to enforce arbitration agreements and class-action waivers.