After the U.S. Supreme Court decided AT&T v. Concepcion, 131 S. Ct. 1740 (2011), the seminal case establishing the supremacy of the Federal Arbitration Act (FAA) over conflicting state laws, businesses have generally prevailed in cases challenging the enforcement of arbitration agreements. That trend, however, may be shifting slightly in the employment law arena with two federal circuit courts having held this summer that arbitration agreements barring employees from pursuing certain types of class claims are unlawful. Both cases involved proposed wage-and-hour class actions that required the circuit courts to analyze the validity of the arbitration agreements under not just the FAA, but also under the National Labor Relations Act (NLRA). These two decisions have resulted in a split among the federal circuit courts, all but ensuring that the U.S. Supreme Court will be resolving the circuit split in the short-term future.
In May, the U.S. Court of Appeals for the Seventh Circuit in Lewis v. Epic Systems, 823 F.3d 1147 (7th Cir. 2016), analyzed whether an employer’s arbitration agreement could bar employees from pursuing class claims in light of the provisions of Section 7 of the NLRA. Section 7 of the NLRA provides that “employees shall have the right to … engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Lewis court held that filing a class or collective action is “concerted activity” under the NLRA, and thus a substantive statutory right. Because it concluded that the right of employees to file a class action is a substantive right, the Seventh Circuit went on to hold that it was an unfair labor practice on the part of the employer to require employees to sign arbitration agreements barring them from participating in class or collective actions.
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