7th Circuit Sets Stage for Supreme Court Arbitration Show Down

Last week the Seventh Circuit’s decision in Lewis v. Epic Systems Corporation, invalidated employment contract provisions requiring employees to arbitrate employment disputes and precluding them from bringing class-actions.

The Seventh Circuit found such provisions violate the National Labor Relations Act.   This decision contradicts decisions by the Second, Fifth, Eighth, Ninth and Eleventh Circuits. which have upheld such provisions.  But those decisions rested at least partially on the Supreme Court’s 2011  AT&T Mobility LLC v. Concepcion decision, which upheld contract provisions requiring arbitration and precluding consumer class-actions.

The Concepcion decision was five to four, with the late Justice Scalia writing the majority opinion for the conservative block of the Court.  With Justice Scalia’s passing, Supreme Court observers are questioning whether a reconstituted Court might scale back or even reconsider the Concepcion decision.    The battle over mandatory arbitration and class-actions waivers must also be viewed in the wider context of the Consumer Financial Protection Bureau’s recent proposed rule prohibiting such provisions in financial services contracts and House Republican’s efforts to quash the rule and reign in the agency.

The Seventh Circuit’s decision sets the stage for a potential showdown regarding whether and when such provisions are enforceable, but in the meantime, employers should continue to include and enforce such provisions.