Seventh Circuit Holds That Collective and Class Action Waivers in Arbitration Agreements are Unenforceable

The Seventh Circuit Court of Appeals held that collective and class action waivers contained in arbitration agreements with employees are unenforceable and violate the National Labor Relations Act. Reaching the opposite conclusion as the Fifth Circuit Court of Appeals and siding with the NLRB, the Seventh Circuit also held that the Federal Arbitration Act does not alter this outcome. The arbitration agreement in question did not allow the employee to opt out, but the Seventh Circuit suggested that arbitration agreements with class and collective action waivers would be unenforceable regardless of the employee’s right to opt out.

Employers operating in Illinois should review their arbitration agreements with counsel and consider the impact of the Seventh Circuit’s ruling on those agreements. The case is Lewis v. Epic Systems Corp., No. 15-2997 (7^th Cir. May 26, 2016).