Urbana bar dodges bullet as court orders another round in arbitration

Mandatory arbitration of employment disputes has been under fire. In Illinois, predispute mandatory arbitration agreements covering discrimination, harassment, and retaliation claims have been banned since 2020. At the federal level, Congress recently passed and President Joe Biden signed a bill prohibiting the arbitration of sexual harassment and assault claims. In the face of this trend, employers that favor arbitration may take heart in a recent decision from the U.S. 7th Circuit Court of Appeals (which covers Illinois employers) vacating a district court's ruling that found an arbitration agreement couldn’t be enforced on grounds of unconscionability.

‘She works layin’ whiskey down’

Brandi Campbell worked at the Silver Bullet Bar in Urbana, Illinois. (If Urbana were a harbor town, the story might evoke thoughts of lonely sailors and that “fine girl” featured in the old Looking Glass tune, but alas we digress.) When she began employment there, she signed a contract with Keagle Inc., the bar’s owner, which included a clause requiring all disputes arising from her employment to be arbitrated.

Despite the arbitration provision, Campbell filed a lawsuit against Keagle under the Fair Labor Standards Act (FLSA) in federal court in Central Illinois. The employer asked the court to compel arbitration in lieu of litigation.

The district court declined to send the case to arbitration because it found the arbitration clause was unconscionable under Illinois law. The trial judge was troubled that the arbitration agreement between Keagle and Campbell was one-sided: