Seventh Circuit States Class Action Waivers in Arbitration Agreements are Invalid

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All Illinois, Indiana, and Wisconsin Employers

EFFECTIVE

May 26, 2016

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In Lewis v. Epic Systems Corporation, the Seventh Circuit Court of Appeals unanimously stated that arbitration agreements that prohibit collective arbitration or collective actions, including class, collective and representative actions, violate Section 7 of the National Labor Relations Act (“NLRA”).

In 2014, Epic Systems distributed an e-mail to some of its staff containing an arbitration agreement, requiring employees to bring wage-and-hour claims through individual arbitration only.  There was no option to decline.  Employee Jacob Lewis acknowledged the agreement; however, Lewis later had a dispute with Epic and filed a lawsuit alleging that he and several co-workers were misclassified, resulting in deprivation of overtime pay.  Lewis argued that the arbitration agreement violated Section 7 of the NLRA, stating that it interfered with the employees’ right to engage in concerted activities for mutual aid and protection.  The district court agreed.

The Seventh Circuit agreed as well, diverging from previous decisions by numerous other circuit courts.  Further, the Seventh Circuit stated the entire arbitration agreement was unenforceable, depriving the employer of any potential arbitration of any of the employees’ individual claims as well. The ultimate impact of Lewis v. Epic is uncertain, given that Epic could potentially seek Supreme Court review.  Until then, however, employers in the 7th Circuit must take action to remove unenforceable class action waivers from arbitration agreements.

Action Items:

  1. Employers in the effected states should review current arbitration agreements with legal counsel to ensure they comply with this latest ruling.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2016 ManagEase, Incorporated.

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