From FOI Jean Sternlight:

The Seventh Circuit has just issued a very important decision, Lewis v. Epic Systems Corp., banning the use of an arbitral class/collective action prohibition in a non-unionized wage and hour claim. The decision is based on Section 7 of the National Labor Relations Act, which protects the right of all employees, unionized or not, to engage in concerted activity.  The unanimous three judges (Chief Judge Diane Wood writing) find that given Section 7, the arbitral class and collective action prohibition the company sought to impose (no opt out opportunity provided) was illegal and thus unenforceable under the FAA.  The court says it would have independently reached this decision but it also defers to the NLRB’s decision, to the same effect, in DR Horton.

The Seventh Circuit breaks with some other Circuits in refusing to find that the FAA preference for arbitration trumps the NLRA’s protection of Section 7 rights. Instead, the court says the two statutes can and should be read as complementary to one another – arbitration is fine but can’t be illegal.  “Here, the NLRA and FAA work hand in glove.”  The court recognizes that several other Circuits have found to the contrary but says those courts have not “engaged substantively with the relevant arguments.”  (I have to remember that phrase!)  Further, the court labels as “dictum” the Supreme Court’s language in American Express and Concepcion to the effect that class actions are inconsistent with arbitration, but says that in any event such dictum is irrelevant because the result of voiding the waiver will not be classwide arbitration but rather (potentially) a litigated class action on plaintiff’s wage and hour claim.  Expect a cert petition, and it will be fascinating to see what the Supreme Court minus Justice Scalia does with this well-reasoned decision.

Jill Gross is a Professor of Law and the Director of the Investor Rights Clinic at Pace Law. She teaches the Investor Rights Clinic and Seminar, Mediation and Arbitration, Professional Responsibility, and Securities Litigation and Enforcement. She has published numerous law review articles in the area of dispute resolution and investor justice, and has been quoted in the national media on issues relating to securities arbitration. She is also a contributor to ADR Prof Blog.