Solo Arbitration Violates Right to Concerted Activity

By Jon Steingart

May 26 — A software company can't enforce an agreement that would require an employee to individually arbitrate his wage and hour claim because doing so would violate his right to engage in concerted activity under the National Labor Relations Act, the Seventh Circuit has ruled, splitting with another circuit court that has weighed in on the issue ( Lewis v. Epic Sys. Corp. , 2016 BL 167679, 7th Cir., No. 15-2997, 5/26/16 ).

“This is a decision of major significance,” said Benjamin Sachs, a professor at Harvard Law School who thinks the decision was rightly decided. “We have a federal court of appeals for the first time saying that the National Labor Relations Board’s theory in D.R. Horton is the correct interpretation of the law.” (357 N.L.R.B. No. 184, 192 LRRM 1137 (2012)) (5 DLR AA-1, 1/9/12).

“In D.R. Horton the NLRB says the NLRA at its core protects collective action or concerted activity,” Sachs told Bloomberg BNA May 26. The U.S. Court of Appeals for the Fifth Circuit rejected the NLRB's position because it didn't give appropriate weight to the Federal Arbitration Act (233 DLR AA-1, 12/3/13).

“I don’t think this decision says employers can’t use arbitration at all,” Bill Parsons, a shareholder in the Madison, Wis., office of Hawks Quindel S.C., which represented the plaintiff, told Bloomberg BNA May 26. “You can have arbitration, but you have to allow arbitration to proceed collectively.”

“What we’re saying is when there’s a conflict between two federal laws, the first thing the court has to do is read them together in a harmonious way,” he said.

Writers' Overtime Claim Leads to Appeal

Jacob Lewis sued for overtime, alleging he and other technical writers were incorrectly classified as exempt under the Fair Labor Standards Act and Wisconsin law, Judge Diane Wood wrote for the Seventh Circuit. Epic moved to compel arbitration pursuant to its mandatory arbitration policy, Wood said.

The NLRA says employees have the right to engage in “concerted activities.” This should be construed broadly to include “representative, joint, collective, or class legal remedies,” she said.

“If you waive employees’ right to concerted legal activity you are making employees waive their right to what is protected under federal labor law,” Sachs said. “What you’re doing is saying ‘you cannot proceed in any form.'

Lewis will proceed with the overtime claim in the trial court if Epic Systems Corp. doesn't appeal it to the U.S. Supreme Court, Parsons said.

Charlotte Garden, an associate professor at Seattle University School of Law, thinks the high court is more likely to affirm the Seventh Circuit following the death of Justice Antonin Scalia. “Justice Scalia was a major proponent of arbitration, and the Supreme Court would have nearly certainly rejected the Board’s view,” she told Bloomberg BNA.

“But now, with the Seventh Circuit ruling strongly in favor of the Board’s approach, and the possibility of a ninth Justice who would uphold the rule, the Board’s view has been reinvigorated,” Garden said.

Judges Ilana Rovner and John Robert Blakey joined in the opinion.

Seyfarth Shaw LLP represented Epic Systems Corp. Attorneys for Epic didn't immediately respond to requests for comment.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com