Employment Law Daily DoorDash delivery driver must arbitrate claim that independent contractor classification improper
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Monday, April 30, 2018

DoorDash delivery driver must arbitrate claim that independent contractor classification improper

By Ronald Miller, J.D.

Because the delivery drivers for DoorDash, a food delivery service, signed an arbitration agreement with a valid delegation clause, a driver was compelled to arbitrate his claims that they were misclassified as independent contractors, ruled the Fifth Circuit. The appeals court applied its 2016 ruling in Reyna v. International Bank of Commerce, which held that arbitrability claims should be resolved at the outset, even before considering conditional class certification. Consequently, the appeals court concluded that the district court did not err in enforcing the arbitration agreement (Edwards v. DoorDash, Inc., April 25, 2018, Southwick, L.).

Independent contractor agreement. DoorDash customers in over 200 cities can use a mobile app to order food from certain restaurants. Delivery drivers for the company, called Dashers, sign an Independent Contractor Agreement (ICA). The ICA contained an arbitration clause in which the parties agreed to final and binding arbitration of any disputes. There was no right or authority for any dispute to be brought or arbitrated as a class or other collective action. Moreover, the class and collective action waiver was not severable from the agreement. The agreement also included a choice-of-law provision stating that the agreement was to be governed by the laws of California.

A delivery driver brought suit against the company in Texas, alleging violations of the FLSA. He sought conditional certification of a class of similarly situated individuals on a nationwide basis. In response, DoorDash filed an emergency motion to stay conditional certification and a motion to compel individual arbitration and dismiss the suit. The district court concluded that there was an arbitration agreement with a valid delegation clause, and granted DoorDash’s motion to compel arbitration and dismissed claims without addressing the class certification motion.

Arbitrability. On appeal, the employee had two primary contentions. First, he argued that the district court erred in deciding the arbitrability question before class certification. Second, he argued that the district court erred in enforcing the arbitration agreement. After finding that it could exercise jurisdiction to review the case because an appeal of a final decision regarding arbitration is permissible, the appeals court turned to consider the employee’s first contention.

As an initial matter, the employee argued that the district court erred in ruling on DoorDash’s motion to dismiss and compel arbitration before it ruled on his motion to certify a class. Relying on Reyna, a magistrate concluded that arbitrability was a threshold question and therefore ruled on it without considering the motion for conditional certification. In that case, the Fifth Circuit held that arbitrability claims should be resolved at the outset, even before considering conditional class certification.

In this instance, the employee’s arguments against applying Reyna were limited to identifying factual differences. However, he failed to explain why those differences compel a different result. Rather, as in Reyna, the appeals court again agreed that “whether the named plaintiffs must arbitrate their claims should be decided before the nationwide notification issue is reached.”

Consequently, the Fifth Circuit continues to hold that arbitrability is a “threshold question” to be determined “at the outset,” a holding favoring arbitration.

Enforcement of arbitration agreement. The employee next argued that the district court erred in concluding there was a valid arbitration agreement with a delegation clause—sending the dispute about arbitrability to an arbitrator, thereby finding that the FLSA claims were questions for the arbitrator. Essentially, the employee argued that the arbitration agreement was unconscionable. For its part, DoorDash argued that once the court concluded there was a delegation clause, the court’s proper inquiry ended, so that the order granting the motion to compel arbitration and dismiss should be affirmed.

A court makes two determinations when deciding a motion to enforce an arbitration agreement. First, the court asks whether there is a valid agreement to arbitrate, and second, whether the current dispute falls within the scope of a valid agreement. If there is an agreement to arbitrate with a delegation clause, and absent a challenge to the delegation clause itself, the court will consider the clause to be valid and compel arbitration.

Formation of contract. In this instance, the employee challenged the formation of the ICA and then the validity of the arbitration agreement and the ICA as a whole. The court evaluated the underlying agreement under state law, noting that the agreement included a choice-of-law provision specifying California law.

Here, the employee argued that the contract was illusory because DoorDash never signed the independent contractor agreement, never delivered it, and retained the ability to unilaterally modify it. As an initial matter, the court concluded that the agreement did not have to be signed by DoorDash to be enforceable where the company performed under the agreement. Further, there was no merit to the employee’s contention that a contract was never formed because it was never delivered to him. Because the employee signed and returned the contract to DoorDash it was “delivered.”

The court also rejected the employee’s contention that a valid agreement did not exist because DoorDash retained the power to modify the arbitration agreement unilaterally. Rather, California courts have “concluded a binding arbitration agreement exists even though the employer retains the right to modify its personnel policies.” Here, the employee conceded that the ICA could only be modified in an express written agreement by DoorDash.

Delegation clause. Finally, the court turned to the question of whether the there was an enforceable delegation clause. Here, the employee conceded the arbitration provision incorporated a delegation clause. Because the ICA contained an agreement to arbitrate, which, through incorporation of the AAA rules, contained an agreement to delegate issues of arbitrability to the arbitrator, the court treated it as valid absent any specific challenge by the employee. Accordingly, the judgment of the district court was affirmed.

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