Seventh Circuit: Class and Collections Waivers Violate NLRA
Court of Appeals upholds an NLRB decision holding
that class and collection action waivers in arbitration agreements are unlawful
This article was published in the May 26, 2016, issue
of the National Law Review. See a
follow-up article re: a Ninth Circuit ruling.
The teeter-totter battle between the National Labor
Relations Board (NLRB) and employers regarding the legality of class and
collective action waivers in arbitration agreements continues. Joining the fray
this week is the Seventh Circuit, issuing a decision in
Jacob Lewis v. Epic Systems Corporation agreeing with the NLRB that such
waivers violate both the National Labor Relations Act (NLRA) and the Federal
Arbitration Act (FAA).
At issue in Epic Systems Corp., was a provision in an
arbitration agreement the Madison-based software company sent to its employees
via e-mail on April 2, 2014. The provision at issue in the agreement entitled
“Waiver of Class and Collective Claims” provided that employees waived “the
right to participate in or receive money or any other relief from any class,
collective, or representative proceeding.” The agreement saved the employees
time from executing and returning the agreements, stating that employees were
“deemed to have accepted the [a]greement” if they “continue[d] to work at Epic.”
Not deterred by this waiver, Jacob Lewis, a former Epic Systems technical
writer, and other technical writers brought a collective action lawsuit alleging
their employer violated the Fair Labor Standards Act (FLSA) by misclassifying
them as exempt employees. The company sought to dismiss on the grounds that the
collective action was precluded by the arbitration agreement, however, Mr. Lewis
and his co-workers’ defiance was rewarded when the District Court refused to
enforce the waiver and the Seventh Circuit most recently affirmed.
The significance of the decision is that the Seventh
Circuit is the first Circuit Court to stand in direct contrast to the
well-documented position taken for several years by the Fifth Circuit. The
primary battleground for the back-and-forth between the NLRB and employers on
this issue until this week had been the Fifth Circuit. In 2012, the Board issued
D.R. Horton, Inc. decision explaining that “from its earliest days” the
Board has held that “employer-imposed, individual agreements that purport to
restrict Section 7 rights” violate the NLRA. The company appealed that decision
to the Fifth Circuit in 2013 which overturned the NLRB. Rather than appeal the
decision to the Supreme Court, the NLRB decided to double down on its position
Murphy Oil USA, Inc., again determining that a class and collective action
waiver violated the NLRA. Employers have the option to appeal an NLRB decision
with the D.C. Circuit or any circuit in which it has sufficient business
options. As a result, the Murphy Oil wisely appealed the decision to the NLRB
which again overturned the NLRB decision explaining to the board, that we’ve
“been here, done that.”
Here is where it gets interesting (if it isn’t
interesting enough for you already) – rather than risk appealing to the Supreme
Court and receiving a split 4-4 affirmance of the Murphy Oil decision, the NLRB
asked for a rehearing by the Fifth Circuit en banc.
The Fifth Circuit recently denied this request. The NLRB was therefore faced
with deciding whether to finally appeal the D.R. Horton and Murphy Oil decisions
up to the Supreme Court, or continue its cat-and-mouse game with employers with
sufficient contacts in Fifth Circuit states.
The Seventh Circuit decision now opens the door for the
NLRB to potentially sit back and allow Epic Systems to appeal the decision to
the Supreme Court. The significance of this is that while politicians continue
to politick and the nation continues to have a Supreme Court operating at less
than full capacity, split 4-4 decisions have the same weight as an affirmance.
As a result, while the impact of the Seventh Circuit decision may be felt by
Epic Systems Corporation today, the greater resulting impact of the decision
should soon be felt by all as the decision may have ushered the NLRB and an
employer one step closer toward an epic showdown before the Supreme Court on the
issue of class and collective action waivers.
 A case heard before all the judges of a court.
 For you baseball fans, this is the equivalent of the
“tie-goes-to-the-runner” with the NLRB being the runner; for you soccer
fans, this would mean the NLRB would have the equivalent advantage of an
away-goal; and for basketball and football fans, this is the equivalent
of winning the head-to-head regular season matchup for determining home
court advantage for the playoffs.