In Lewis v. Epic Systems, the 7th Circuit Court of Appeals struck down a forced arbitration clause that prevented employees from bringing class actions to challenge certain employment practices. The forced arbitration provision would have made every employee take on the employer one-by-one outside of court.

I’m hopeful the 7th Circuit’s wonderful opinion will become the trend and not an anomaly. Below is an insightful article by Jessica Silver-Greenberg and Noam Scheiber on the opinion.

Court Rules Companies Cannot Impose Illegal Arbitration Clauses

A federal appeals court on Thursday ruled that companies cannot force their employees to sign away their right to band together in legal actions, delivering a major victory for American workers and opening an opportunity for the Supreme Court to weigh in.

The United States Court of Appeals for the Seventh Circuit in Chicago struck down an arbitration clause that banned employees from joining together as a class and required workers to battle the employer one by one outside of court.

In its opinion, the three-judge panel said that Epic Systems, a Verona, Wis., health care software provider, violated federal labor law when it required its workers to bring any disputes individually to arbitration, a private system of justice where there is no judge or jury.

“The increasing use of mandatory arbitration agreements and the prohibition on workers proceeding as a class has been one of the most major developments in employment the last decade,” said Benjamin Sachs, a professor of labor law at Harvard Law School. “Most of the court decisions have facilitated this development. This is a major move in the opposite direction.”

By preventing employees from joining together in a collective action, the court said, the arbitration clause ran afoul of a critical piece of the National Labor Relations Act, a landmark 1935 law that gave workers the right to unionize and engage in concerted action.

The decision announced on Thursday, in Lewis v. Epic Systems, will almost certainly prove controversial because it directly conflicts with an earlier decision by an appeals court in Louisiana, a split that could prompt the Supreme Court to wade back into the fray. Similar cases are pending across the country.

In a pair of decisions in 2011 and 2013, the Supreme Court blessed the widespread use of arbitration in a case pushed by a group of credit card companies. The credit card companies turned to a 1925 federal law that formalized arbitration as a means for companies to hash out their disputes with one another.

Arbitration clauses have proliferated over the last 10 years. Companies have added them to tens of millions of contracts for things as diverse as cellphone service and nursing home care.

Employers have argued that arbitration provides a more efficient forum for workers to resolve their disputes.

That assertion has been largely anecdotal, though. But an investigation by The New York Times found that, once stripped of their ability to join together in a group, many employees simply give up.

Federal and state officials have said they are concerned because the individual and closed-door nature of arbitration can obscure patterns of wrongdoing from other employees.

Still, courts across the country have largely upheld arbitration clauses, deferring to the Supreme Court, which ruled that the Federal Arbitration Act, the 1925 law dusted off by the credit card companies, beats out even muscular federal laws.

In a 2012 decision involving D. R. Horton, a homebuilding company in Fort Worth, the federal labor board said that employers could not prevent workers from banding together. Preventing that, the board said, violated the National Labor Relations Act, which explicitly allows for collective action.

Undeterred, D. R. Horton appealed the labor board’s decision, sending the case to the appellate court in Louisiana. That court deferred to the earlier Supreme Court cases in a 2013 decision.

In its decision on Thursday, the Seventh Circuit ruled that the Federal Arbitration Act did not protect all arbitration clauses. The court found that the law allows illegal arbitration clauses to be thrown out, and that Epic Systems had precisely one of those clauses.

The case began when an employee, Jacob Lewis, sued Epic Systems over denying him and other employees overtime wages. Epic, citing an arbitration clause that Mr. Lewis was required to agree to, tried to get the case thrown out. The district court thwarted the company’s request. Ultimately, Epic appealed, sending the case to the court of appeals.

The court was unequivocal in answering whether Epic’s arbitration clause violated the law. “The answer is yes,” the court said.

Correction: May 26, 2016
An earlier version of this article misstated the location of the United States Court of Appeals for the Seventh Circuit. It is in Chicago, not Madison, Wis.