Epic’s arbitration agreement found illegal by 7th Circuit

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In a victory for workers’ rights advocates, the 7th Circuit Court of Appeals has ruled that Epic Systems Corp. cannot ban class actions by forcing its employees to individually arbitrate their claims for unpaid wages.

The decision affirmed a September 2015 ruling by U.S. District Court Judge Barbara Crabb, who denied Epic’s motion to dismiss a class action for overtime wages brought by current and former technical writers.

Hawks Quindel and Habush Habush & Rottier filed a class-action lawsuit against Epic on behalf of Jacob Lewis and a group of employees who were not being paid overtime wages. These employees are technical writers who prepare the standard documents that accompany Epic’s software. The lawsuit contends that Epic misclassified these employees as being exempt from federal and state overtime requirements, and that they should be paid time and a half for all hours worked over forty per week, as well as penalty damages.

In April 2014, Epic imposed an arbitration agreement that prevented certain employees, including technical writers, from bringing suit in court to recover unpaid wages. This agreement also blocked employees from joining together to bring a class-action case.

In response to the suit filed by Hawks Quindel and Habush Habush & Rottier, Epic asked the court to dismiss the case and require Lewis to arbitrate his case individually. The District Court denied that motion and Epic appealed to the 7th Circuit.

The 7th Circuit affirmed the lower court’s decision in a ruling that the plaintiffs’ attorneys argue protects the right of millions of workers to act collectively for legal recourse against their employers. Because a provision in Epic’s arbitration agreement bars its employees from bringing their claims on a class or collective basis, the 7th Circuit determined that this provision violates the National Labor Relations Act, and so is unenforceable and illegal. The 7th Circuit declared that “(t)he protection for collective action found in the NLRA, moreover, extends far beyond collective litigation or arbitration; it is a general principle that affects countless aspects of the employer/employee relationship.” The decision means the case will remain in court where the employees can pursue a class action for unpaid overtime.

Employees’ ability to fight collectively for unpaid wages is a right dating back to the passage of the NLRA in 1935. The 7th Circuit recognized as much, noting that “(i)n enacting the NLRA, Congress’s purpose was ‘to equalize the bargaining power of the employee with that of his employer by allowing employees to band together in confronting an employer regarding the terms and conditions of their employment.'”

Mandatory arbitration agreements that strip workers of this right have proliferated in recent years. The 7th Circuit broke from other circuits that have largely rubber-stamped these no-class provisions in favor of individual arbitration. Finding that “none (of these courts) engaged substantively with the relevant arguments” that it is illegal to force employees to waive their right to act together, the 7th Circuit’s ruling marks an important victory for employees. Unlike other circuits, the 7th Circuit found that the NLRA and federal arbitration law “work hand in glove,” because the NLRA “prohibits enforcement of contract provisions like Epic’s, which strip employees’ rights,” while federal arbitration law declares such illegal contracts unenforceable.

Had Epic succeeded on this motion, each individual employee would have been required to go through the arbitration process separately to determine whether Epic had compensated them properly, rather than allowing all employees with the same job classification to have this question decided in a single proceeding.

“This is a major victory not only for the Technical Writers at Epic, but all employees in the 7th Circuit,” attorney Caitlin Madden said. “The 7th Circuit’s decision makes clear that employees have the right to act together when an employer is not paying them correctly. Further, employers cannot take away employees’ right to their day in court.

“This decision, in addition to the new overtime rules issued by the U.S. Department of Labor last week, are two big wins for employees nationwide,” she added.