Appeals Court Ruling Could Undercut Mandatory Arbitration

A federal court in Chicago handed down a big win for workers last week. It said a Wisconsin tech company cannot stop employees from filing group labor lawsuits -- and that could have effects in Indiana.

The Seventh Circuit Court of Appeals ruled that Madison-based Epic Systems couldn't make employees waive their right to team up in court.

It nullified the arbitration agreement workers signed when they were hired, on the grounds it infringed on a federally protected right.

And that could have broader implications for arbitration agreements, which Indiana University professor Chuck Davis says more companies have required as a condition for employment in recent years.

"Part of the goal, ideally, would that this process would become more efficient, more speedy, less costly for both parties to get things done," Davis says. But, he adds, some contracts are so broad that they discourage workers from complaining at all.

That was the federal finding against the home improvement chain Menard’s in April, stemming from a complaint by an Indiana worker.

Davis thinks more cases like that -- or a stronger court precedent -- could force companies to narrow their use of arbitration agreements. An appeal of the Epic Systems ruling would send that case to the U.S. Supreme Court.