Late last week, the Seventh Circuit issued a decision siding with the National Labor Relations Board's position and holding class and collective action waivers in that case to be invalid as contrary to substantive rights to act collectively that are guaranteed by the National Labor Relations Act. The decision of Lewis v. Epic Systems Corporation, No. 15-2997, can be accessed here.
The court suggested that such collective action rights could conceivably be waived in a collectively bargained agreement with a union, but the agreement in question was part of a program applicable to individuals. The Seventh Circuit's decision splits from other Circuit courts, including, most prominently, the Fifth Circuit, and positions the issue for possible resolution by the U.S. Supreme Court. The arbitration and waiver provisions at issue in Lewis applied to wage and hour claims (e.g., overtime claims), but the decision has broader scope and also would apply to waivers of other class and collective claims such as discrimination claims.
Importantly, the agreement in Lewis specifically stated that if the class waiver was found invalid, any such class claims could be heard only in court, not arbitration. The district and appeals courts respected this provision and thus declined to compel arbitration of the claims at issue. Absent such a "failsafe" provision, the striking down of a class/collective action waiver could result in class or collective claims being compelled to arbitration. This can be a problematic result due to, among other things, the very limited bases for appeals of arbitration awards.
Unless and until the U.S. Supreme Court (or Congress) provides further clarity on the issue, class and collective action waivers retain utility, particularly outside the Seventh Circuit. Furthermore, the principal remedy for an invalid waiver appears to be unenforceability, although liability exposure could be greater if an individual is terminated or not hired for refusing to sign an agreement containing a class waiver that is found to be invalid. Employers may wish to review their arbitration and other dispute resolution agreements to determine whether they contain class or collective action waivers and appropriate next steps.