Epic Systems Corporation, a healthcare software company in Wisconsin thought it could prevent its employees from suing to recover alleged failure to pay overtime by a simple arbitration agreement. Epic required its employees, on pain of losing their jobs, to agree that any wage-and-hour claims would be settled only by individual arbitration and that such claims could not be pursued in a class or collective action.
When one of Epic’s employees sued for non-payment of overtime, on his own behalf and on behalf of other Epic employees—a class action—Epic brought out the arbitration agreement and claimed that the Federal Arbitration Act required that the court dismiss the class action and order that each employee must file a separate arbitration to assert non-payment of overtime to himself. The court reasoned that the arbitration agreement violated the National Labor Relations Act (NLRA) which guarantees employees the right to organize into labor organizations—unions—and to “engage in other concerted activities for the purpose of … mutual aid or protection.”
On May 26, 2016, the Seventh Circuit Court of Appeals, in a thoroughly written opinion, agreed.
So what was the big deal?
The Federal Arbitration Act has been around since 1947. It has long been heralded as a quick, easy and inexpensive alternative to the courts in resolving legal conflicts: “A written provision in any … contract … to settle by arbitration a controversy thereafter arising out of such contract… shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Federal Arbitration Act, 9 U.S.C. § 2.
However, the “big guys” from large employers to manufacturers of consumer goods to for-profit educational institutions have used arbitration to prevent the “little guys” from pursuing viable claims. When a class action waiver is included it further limits the ability to redress wrongs. This is particularly prevalent in the overtime arena where many employees simply choose to do nothing because the concern for retaliation is pervasive. Class actions given employees power in numbers and can often overcome any fears of
The decision by the Seventh Circuit was forced to balance the power of the NLRA and the FAA and it ruled unequivocally in favor of the NLRA – protecting the right of employees to pursue class and collective actions even in the face of a waiver to seek “mutual aid or protection.”
Maduff & Maduff has recovered millions of dollars in unpaid wages and overtime wages for employees improperly paid or misclassified. And although retaliation for bringing an overtime claim is rare, it is illegal and we have successfully prosecuted companies for retaliatory acts. If you believe that you are not being paid for all hours worked, or you are not properly classified, you need an employment lawyer. Call us today.