The Seventh Circuit Court of Appeals ruled yesterday, in Lewis v. Epic Systems Corporation, __ F.3d __ (7th Cir. 2016) that employer arbitration clauses that ban class or collective actions violate the National Labor Relations Act and are therefore unenforceable.

Over the last few decades, employers have been including class action waivers in their arbitration policies in order to avoid class liability for wage and hour violations.  Employers are frequently sued by classes of employees when they violate federal and state wage and hour laws.  Some lawsuits challenge a classes “exempt” designations.  Other challenge a restaurants tip policies.

Lawyers for employees have been battling this issue for years and finally have a breakthrough.  The Seventh Circuit Court of Appeals ruled yesterday that class action waivers violate the NLRA and are unenforceable.

The NLRA contains a section that protects “concerted activities.”  Section 7 provides that “[e]mployees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  29 U.S.C. Section 157.  Section 8 enforces Section 7 by stating that it “shall be an unfair labor practice for an employer … to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [Section 7].”  Id. Section 158(a)(1).

The Fifth Circuit had already ruled in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) that Section 7 did not invalidate these class action waivers and so there is now a split among the circuits.  It is likely that the employer will seek review by the U.S. Supreme Court but with only 8 justices sitting on the Supreme Court, it may be that this case won’t be reviewed.

In sum, this is a great day for employees who now have hope that they can protect themselves from employers’ wage and hour violations by using class actions.  Keep an eye out for other rulings from other circuits (there are cases pending now in the 2d, 3d and 9th Circuits) and perhaps the U.S. Supreme Court.

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