A federal appeals court ruled Thursday that Epic Systems — the Verona-based health care software company that employs more than 9,000 people in the Dane County area — broke federal labor laws by preventing some employees from taking up wage complaints collectively.
It's a deceptively significant ruling that raises questions about what companies can or can't do to control the ways legal disputes involving employees are handled. Some labor advocates are treating the decision as a win for labor — a reporter with The New York Times went so far as to describe it as "a major victory for American workers."
Here's a rundown of five key points to take away from the appeals court ruling:
1. The ruling comes as part of a broader case dealing with overtime pay.
The case in question is Jacob Lewis v. Epic Systems Corp., a class-action lawsuit concerning overtime pay for Epic employees. Lewis, the lead plaintiff in the case, is a former Epic technical writer, meaning he provided technical documentation of Epic's complex software. His lawsuit claims that the company is wrong to say that technical writers are exempt from overtime pay under federal law.
The legal challenge comes on the heels of another lawsuit in which Epic employees fought for overtime pay — a $5.4 million settlement was reached in that case last year.
It's important to note that the ruling handed down Thursday didn't touch on the matter of the overtime dispute. The U.S. 7th Circuit Court of Appeals — the Chicago-based appeals court that handles cases from lower courts in Wisconsin, Illinois and Indiana — was merely ruling on Epic's request to dismiss the lawsuit. The corporation had made the case that a contract Lewis and other Epic workers had signed meant that the overtime dispute couldn't be resolved with a class-action lawsuit.
2. The ruling means that Epic can't block a class-action lawsuit brought by its employees.
In 2014, Epic had certain employees sign a contract that prohibited them from joining forces to resolve wage disputes, such as by filing a class-action lawsuit. Instead, such disputes would be handled on a case-by-case basis.
However, judges on the 7th Circuit have now declared that the contract violates the National Labor Relations Act, the historic 1935 law that gave workers the right to collectively bargain. According to the court, the contract breaks an NLRA rule forbidding companies from impinging on the right of workers to engage in "concerted activities for the purpose of … mutual aid or protection."
3. The ruling also declared that an arbitration deal doesn't necessarily make a company exempt from NLRA rules.
On top of requiring certain workers to take up wage disputes individually, the Epic contract required workers to settle their complaints through arbitration — a private system of complaint-resolution that takes place outside of the courts. Epic attorneys argued that because of that arbitration deal, the so-called "class-action waiver" is actually legal. They said that another law called the Federal Arbitration Act essentially overrides NLRA rules when arbitration is in the mix.
The 7th Circuit judges, however, didn't buy Epic's line of argument. They ruled that the FAA and the NLRA work in harmony, and that one law doesn't necessarily trump the other.
4. The decision opens up the possibility of a Supreme Court battle.
Perhaps the main reason the ruling is a big deal is that it conflicts with other federal appeals court rulings on similar contracts, often referred to as "class-action waivers."
In a ruling handed down by the 5th Circuit appeals court in 2013, a waiver similar to the Epic contract was found to be legal. The court actually upheld the waiver based on an argument that the Federal Arbitration Act preempted the NLRA — the same argument that didn't work for Epic. A difference of opinion at the circuit court level could mean the high court will be inclined to weigh in, should Epic decide to file a petition.
5. Some labor advocates are describing the ruling as a victory.
Some people are cheering the decision on the basis that class-action waivers end up hurting workers.
One of the lawyers arguing for the plaintiffs in the Epic case said in a statement that the decision, in addition to "the new overtime rules issued by the U.S. Department of Labor last week, are two big wins for employees nationwide."
Epic Systems has declined to comment on the ruling.
Other labor advocates, like one writer for the progressive blog Think Progress, said that the ruling means that corporations "could soon lose their ability to tie the little guy’s hands and effectively guarantee they’ll never face serious legal challenges to potentially abusive business practices."
That said, some corporations would likely counter-argue that arbitration agreements — in labor contexts and otherwise — help resolve disputes more quickly and easily than class-action suits or collective action could.