The Seventh Circuit Court of Appeals covers Illinois, Wisconsin and Indiana. The Seventh Circuit previously invalidated arbitration agreements which required employees’ claims to be brought individually and not as class actions. The Seventh Circuit reasoned that such waivers violated employees’ right to engage in concerted activities under the National Labor Relations Act. On May 21, 2018, the United States Supreme Court reversed the Seventh Circuit.
Why is this important?
Employee class action lawsuits are one of the worst things that can happen to a business. They can be huge and expensive to defend. Usually the plaintiffs have a right to recover their attorneys’ fees from their employer; the leverage this creates makes it more economical to settle questionable claims than to fight them.
These cases often take the form of a wage and hour dispute in which a group of employees allege they were improperly classified as exempt from overtime or were systematically underpaid for off the clock work (such as checking e-mails from their smartphones in the evening).
Wage and hour class action lawsuits have for many years now outnumbered discrimination lawsuits both in number and in cost. That is because plaintiffs’ lawyers have learned to ask questions about overtime exemptions and pay policies of every disgruntled former employee who comes through their doors – whether or not the employee came to the lawyer with a wage and hour complaint or some wholly unrelated issue. They do this because questionable claims which individually are too small to pursue have become lucrative in the class action context.
Therefore employers with large workforces should seriously consider requiring arbitration agreements which provide that their employees will bring claims individually and not collectively. Contact HolmstromKennedyPC to learn more about class action waivers.