Jacob Lewis v. Epic Systems Corporation, 823 F.3d 1147

Background

Epic Systems required certain employees to accept an arbitration agreement as a condition of continued employment that (1) sent wage-and-hour claims to individual arbitration and (2) waived any right to participate in class, collective, or representative proceedings; it included a clause that if the waiver was unenforceable, class/collective claims must be filed in court.
Jacob Lewis accepted the agreement via Epic’s email process but later sued Epic in federal court under the FLSA and Wisconsin law alleging misclassification and unpaid overtime for technical writers.
Epic moved to compel individual arbitration; Lewis argued the collective-action waiver violated Section 7 and 8 of the NLRA by prohibiting concerted activities for mutual aid or protection.
The district court denied Epic’s motion to compel; Epic appealed to the Seventh Circuit, which reviews denials of motions to compel arbitration de novo.
The Seventh Circuit held the waiver unlawfully interfered with Section 7 rights and, because the waiver is illegal under the NLRA, the FAA’s saving clause permits refusal to enforce the arbitration provision.

Issues

Issue	Lewis's Argument	Epic's Argument	Held
Whether Epic’s individual-only arbitration/collective-action waiver violates the NLRA (Sections 7 & 8)	The waiver forbids concerted activity (collective/class/representative suits), which Section 7 protects; employer-imposed waivers are unlawful, especially when required as condition of employment	The agreement is a private contract and should be enforced; employees agreed to it	Held: Waiver violates Sections 7 and 8; employer interference with Section 7 rights is unlawful, particularly where assent was a condition of continued employment
Whether the FAA requires enforcement of the arbitration clause despite the NLRA conflict	NLRA makes the waiver illegal; the FAA’s saving clause allows courts to refuse enforcement of arbitration agreements on general contract defenses like illegality	FAA’s national policy favoring arbitration preempts NLRA restrictions; FAA should trump NLRA	Held: No preemption; the FAA’s saving clause saves traditional contract defenses (illegality), so the NLRA’s prohibition on such waivers prevents enforcement under the FAA
Whether the right to collective action under Section 7 is merely procedural (so FAA could govern)	Section 7 protects a substantive associational right to concerted activities (including collective legal remedies), not merely a procedural device	The right to class/collective procedures is procedural (e.g., Rule 23) and not a substantive barrier to arbitration	Held: Section 7’s protection is substantive/associational in character and can render prospective waivers unenforceable
Whether prior authority (e.g., D.R. Horton / Fifth Circuit) requires a different outcome	The NLRB and precedent support that employer-imposed individual-only waivers violate Section 7; statutes must be harmonized with FAA via saving clause	Some circuits hold FAA preempts NLRA-based nonenforcement or decline deference to NLRB	Held: Harmonization required; FAA does not displace NLRA here—FAA’s saving clause permits refusal to enforce illegal waivers, so contrary Fifth Circuit holdings do not control this outcome

Key Cases Cited

Nat’l Licorice Co. v. NLRB, 309 U.S. 350 (recognizing contracts that renounce NLRA rights are unenforceable)
J.I. Case Co. v. NLRB, 321 U.S. 332 (private contracts conflicting with NLRB functions must yield)
NLRB v. City Disposal Sys., 465 U.S. 822 (Section 7 protects concerted activities including representative action)
D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. decision adopting NLRB view that individual waivers of collective action violate NLRA)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (FAA policy favoring arbitration; limits on defenses that single out arbitration)
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (illegality is a defense to enforcement under the FAA)
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (arbitration does not extinguish substantive statutory rights)
Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (statutes capable of coexistence should be harmonized)