Seventh Circuit Finds Class Action Waivers Violate Federal Labor Law

June 3, 2016
Rachel Bien

Last week, the U.S. Seventh Circuit Court of Appeals struck a blow to employers that require their employees to waive their right to bring class and collective actions to remedy wage and hour violations, finding these waivers violate the National Labor Relations Act’s right to engage in “concerted activities” to improve workplace conditions.

Like many employers, Epic required its employees to agree to bring any claims against the company in private arbitration, rather than publicly in court, and to sue individually, not as a class. Epic did not give its employees any choice – neither they accepted these terms or it could fire them.

In ruling for the employees, the Seventh Circuit affirmed that class actions are a form of concerted activity that the NLRA protects and that Epic’s class action waiver ran “straight into the teeth” of this important protection. Class actions are tremendously valuable, the Seventh Circuit ruled, because they “allow employees to band together and Thereby equalize bargaining power.”

The Seventh Circuit also ruled that the NLRA and the Federal Arbitration Act (FAA) – the federal law governing arbitration agreements – do not conflict but instead “work hand in glove.” The FAA prohibits courts from enforcing illegal contracts, “like Epic’s, which strip away employees’ rights to engage in ‘concerted activities,’” the Seventh Circuit held.

The Seventh Circuit rejected the contrary views of Circuit courts that have enforced class action waivers in other cases. The Court found “several problems” with the “logic” of these rulings. Given these differences, it is likely that the U.S. Supreme Court will ultimately resolve the issue.

The attorneys in Outten & Golden’s class action practice litigate wage and overtime disputes across the U.S. with offices in Chicago, New York, and San Francisco. Our attorneys have experience litigating class and collective actions in the Seventh Circuit, including cases against Jimmy John’s LLC, Noodles & company, PNC Bank, and Steak ‘N Shake.

(*Prior results do not guarantee a similar outcome.)