More On Forced Arbitration

As we have discussed previously, the increased use of forced arbitration by employers is the most destructive force in protecting employee rights. In 2012, the National Labor Relations Board (NLRB) gave some relief when it held that collective action waivers are unlawful under the National Labor Relations Act (NLRA). In re D.R. Horton, Inc., 357 NLRB 2277. Collective action waivers prohibit class claims, which is particularly problematic in the context of wage and hour litigation, where individual claims are small and cost-prohibitive and collective actions are the most efficient way to vindicate employee rights. But since the NLRB’s 2012 decision, no court of appeals had enforced the NLRB’s position in federal court. Indeed, the Fifth Circuit refused to enforce the NLRB’s position in the D.R. Horton case itself. D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344 (5th Cir. 2013)

On May 26, 2016, however, in Lewis v. Epic Systems Corporation, — F.3d —, 2016 WL 3029464 (7th Cir. 2016), a three-judge panel of the United States Court of Appeals for the Seventh Circuit held that a class and/or collective action waiver contained in an arbitration agreement was unlawful under the NLRA. This decision renders class and/or collective action waivers unenforceable in those states covered by the Seventh Circuit–Illinois, Indiana, and Wisconsin. The decision also creates a split among the federal circuit courts that could pave the way for the United States Supreme Court to decide this issue.

This is a hugely important decision for employees. Here’s hoping that when the Supreme Court eventually takes up the issue, it has a full nine-member court and a solid five judge majority to adopt the NLRB and Seventh Circuit’s logic and eliminate collective action waivers.