Outsourcing Justice

Seventh Circuit Creates Circuit Split With Landmark Decision Giving Big Victory to Employees

In Lewis v. Epic Systems Corp., No. 15-2997 (7th Cir. May 26, 2016) (click here for a copy of the decision), the Seventh Circuit held that an arbitration clause violated the National Labor Relations Act (NLRA).  The clause, which required employees to assert wage claims through individual arbitration and not through collective proceedings, interfered with employees’ rights to engage in concerted activity.  As a result, the Seventh Circuit found that the NLRA made the arbitration clause unenforceable.

Regarding FAA preemption, the Seventh Circuit found that there was no irreconcilable conflict between the FAA and the NLRA.   Because of the “savings” clause from section 2 of the FAA, the FAA allows for illegality as a basis for the revocation of an arbitration clause.  Because the clause at hand is illegal under the NLRA, the arbitration clause becomes non-enforceable under section 2 of the FAA.

The Seventh Circuit had to distinguish the Fifth Circuit’s earlier decision in D.R. Horton, where the Fifth Circuit reached the opposite result, finding that the FAA preempted the NLRA.  The Seventh Circuit criticized the Fifth Circuit for not respecting the strong presumption that two federal statutes must be read together in harmony.

This Lewis decision is a great victory for employee rights, and I strongly believe the Seventh Circuit reached the correct result because the FAA was never intended to apply in the employment context.

One thought on “Seventh Circuit Creates Circuit Split With Landmark Decision Giving Big Victory to Employees

  1. Dave Wakely

    Thanks for posting this summary. It is interesting to see how the different circuits apply the same federal law. In Canada, most employment and most arbitrations are governed by provincial law, so our disconnect can be legislative and judicial.

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