Companies can't ban workers from suing and arbitrating as a class, 7th Circuit says
The Chicago-based 7th U.S. Circuit Court of Appeals set up a circuit split when it ruled last week that federal labor law bars companies from imposing arbitration agreements that ban workers from both arbitrating and suing as a class.
Such a ban violates the right to collective action established by the National Labor Relations Act, Chief Judge Diane Wood wrote for the panel. Law.com and the New York Times DealBook blog covered the opinion.
The arbitration agreement by Epic Systems, a health-care software company, required workers to resolve wage-and-hour disputes with the company in individual arbitration. Technical writer Jacob Lewis had agreed to the individual arbitration requirement when the company emailed it to him with a message that it had to be accepted if he wanted to keep his job.
Lewis did not follow the requirement, however, when he alleged in a federal lawsuit that Epic Systems had misclassified technical writers and deprived them of overtime pay.
The appeals court said Lewis had a right to sue under Section 7 of the NLRA, which says employees have the right to bargain collectively and “and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
There is no conflict with the Federal Arbitration Act, the appeals court said. Though the FAA provides that arbitration contracts are valid and enforceable, the law makes an exception for illegal contracts such as Epic’s arbitration agreement, Wood wrote.
The decision notes a contrary ruling by the New Orleans-based 5th U.S. Circuit Court of Appeals.
Harvard law professor Benjamin Sachs commented on the decision in the New York Times article. “The increasing use of mandatory arbitration agreements and the prohibition on workers proceeding as a class has been one of the most major developments in employment the last decade,” he said. “Most of the court decisions have facilitated this development. This is a major move in the opposite direction.”
