CHICAGO – Since a broad decision issued by the U.S. Seventh Circuit Court of Appeals in May, employers have become wary of enforcing the arbitration agreements they may have pressured employees to sign, waiving their rights to bring class actions over wage and employment issues. But that isn't the half of it, employment and labor attorneys said.
"The big picture, right now, is a little bit muddy," said Dustin Dow, an associate in BakerHostetler's Cleveland office who focuses on nationwide class actions and employment and labor representation, during a Cook County Record interview. "And it will continue to be muddy up to, and unless and until the Supreme Court decides to review, which we don't yet know will happen because no one has yet asked the court for review."
"This is just us talking about this right now," said John Lewis, a partner in BakerHostetler's Cleveland office who concentrates on resolving complex employment, labor and regulatory disputes. "And it's OK to talk about it but, really, nothing is settled, not yet."
The difficulty is in decisions handed down by six federal circuits that are not all in harmony. A broad decision with implications on arbitration rules was issued by the Eighth Circuit about a week after the Seventh Circuit decision.
Despite that, Dow and Lewis agreed now is not the time for employers to scrap their arbitration agreement policies. Instead, they recommended employers take no sudden action and watch the legal horizon for any additional decisions that might clarify the various rulings, including possible Supreme Court review.
"There are a lot of balls in the air right now," Lewis said. "We have to wait and see where they fall."
On May 26, the U.S. Seventh Circuit Court of Appeals handed down a ruling in Lewis vs. Epic Systems Corp. That ruling said employers may continue to ask employees sign contracts agreeing to arbitrate disputes over overtime or other wage and hour issues instead of going to court. However, the ruling said forcing an employee to sign such agreements as a condition of employment is a violation of federal law. That renders such contracts largely unenforceable.
On June 2, the U.S. Eighth Circuit Court of Appeals handed down a ruling that seems in conflict with the Seventh Circuit ruling a week prior. The Eighth Circuit found that an employer had not violated section(a)(1) of the National Labor Relations Act in requiring employees agree to arbitration and waive class or collective actions in court.
The Seventh Circuit decision also is at odds with decisions handed down by the Second, Fifth, Ninth and Eleventh Circuits, Dow and Lewis said.
"The other courts have gone in a different direction in their analysis," Lewis said. "That in itself points up the difficulties in the analytical approach."
All of this has left employers in the circuits and nationwide wondering how far to - or even whether they can - rely on class action waivers in employee arbitration agreements to limit class liability, the two attorneys said. Employers in the Seventh Circuit, which covers Illinois, Indiana; and Wisconsin, must be especially circumspect, they said.
"If you're an employer located in one of these states, you will have to follow the Seventh Circuit ruling unless and until the Supreme Court rules," Lewis said.
That could take one to two years, Lewis said.
"The only way this truly is going to be ironed out is for it to be reviewed by the U.S. Supreme Court," Lewis said.
But that won't happen until someone files with the high court for review, which has not yet happened, both attorneys said.
For now, employers should hold the line and not make too many changes to their arbitration agreement policies, both attorneys said.
"My advice is don't be hasty," Lewis said. "There probably are many, many employers who already have arbitration agreements signed. They may be unenforceable, but they still have them."
Making decisions now about changes to company arbitration agreement policies could well be a waste of time, depending on what legal challenges or reviews happen in the next couple of years, both attorneys said.
"The decision you make today may be different from the decision you'll make two years from now," Dow said.