Labor & Employment Law Daily Postmates must arbitrate misclassification claims of 200 couriers
Friday, July 24, 2020

Postmates must arbitrate misclassification claims of 200 couriers

By Wayne D. Garris Jr., J.D.

The app-based delivery service faces over $11 million in administrative filing fees to the American Arbitration Association.

A federal district court in Illinois has granted in part and denied in part cross-motions to compel arbitration of claims against Postmates brought by 200 Illinois-based couriers for the food delivery service. The parties’ mandatory arbitration agreement limited the court’s authority to deciding challenges to the enforceability of the agreement’s class-action waiver, the court said, and so declined to consider Postmates’ argument that the couriers’ counsel properly filed the 200 arbitration demands in accordance with the AAA’s rules. The court also denied the couriers’ request that the court order Postmates to pay the arbitration filing fees, explaining that the filing fee dispute also must be decided by the arbitrator (McClenon v. Postmates Inc., July 20, 2020, Rowland, M.).

Fleet agreement. The petitioners are 200 Illinois-based couriers for Postmates, a food delivery service. In order to work for Postmates, a courier must sign a fleet agreement in which they are identified as independent contractors, not employees. The fleet agreement contains an arbitration provision which requires the parties to resolve all disputes through binding arbitration. In order to initiate arbitration, a courier has to file a demand stating “(1) the name and address of the party seeking arbitration, (2) a statement of the legal and factual basis of the claim, and (3) a description of the remedy sought.” The agreement also includes a class-action waiver.

Delegation clause. A delegation clause in the agreement states, “Only an arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Mutual Arbitration Provision. However, as stated in Section 11B.IV below, the preceding clause shall not apply to the Class Action Waiver and Representative Action Waiver.” Section 11B.IV states that “any claim that all or part of this Class Action Waiver and/or Representative Action Waiver is unenforceable, unconscionable, void, or voidable shall be determined only by a court of competent jurisdiction and not by an arbitrator.”

Arbitration demand. In March 2019, the couriers’ counsel informed Postmates that it represented over 3,000 couriers in California and Illinois who alleged that Postmates misclassified them as independent contractors. The attorneys also stated that the couriers were going to proceed with every arbitration simultaneously, and that 500 drivers per week were engaging the firm.

The parties were unable to reach a resolution, so the couriers filed an arbitration demand with AAA for 4,925 California-based couriers and the 200 Illinois petitioners here. Both demands were filed as a single document listing the couriers’ grievances, with an attached spreadsheet listing each individual claimant. AAA concluded that it would administer the arbitrations, and assessed filing fees to Postmates.

Postmates objects. Postmates argued that the couriers did not initiate arbitration proceedings in accordance with the fleet agreement. Specifically, the couriers filed one, mass demand in order to circumvent the fleet agreement’s class waiver. Thus, according to Postmates, arbitration had not yet begun. AAA informed the parties that the couriers’ demands were proper under AAA’s rules and that Postmates had to raise issues with the arbitration demand to the arbitrator. Further, AAA would not administer the couriers’ claims unless Postmates paid $11,022,400 in administrative filing fees by June 13, 2019. Postmates refused to pay the filing fees.

Postmates continued to argue that the couriers filed a collective demand. The couriers then refiled individual demands for each courier using AAA’s individual demand form. However, Postmates then argued that the demands asserted “copied and pasted” generic claims. Postmates again refused to pay the fees.

California litigation. On June 3, 2019, in the California case, Adams v. Postmates, the couriers moved to compel arbitration and for an order that Postmates pay arbitration filing fees on behalf of the California couriers. Postmates filed a cross-motion to compel arbitration requesting that petitioners refile their demands as individual arbitration demands and proceed to arbitration on an individual basis. The court granted the motions to compel arbitration but denied the couriers’ requests for fees, as well as Postmates’ request that the couriers refile. (Subsequently, the court held the parties must proceed to arbitration pursuant to the fleet agreement, and in a March 5, 2020 decision, rejected Postmates’ contention that requiring the company to proceed before its appeal of the decision could be heard by the Ninth Circuit would result in irreparable harm.).

After the California decision, the Illinois couriers filed a petition to compel arbitration and for an order that Postmates pay filing fees. Again, Postmates cross-moved to compel arbitration and for the couriers to refile individually.

Individual arbitration. The court first had to decide whether it had authority under the parties’ agreement to determine whether the couriers properly filed their arbitration demand. At issue was the exception in the fleet agreement’s delegation clause. Under the delegation clause, questions about the interpretation, applicability, enforceability, or formation of the fleet agreement were to be decided by the arbitrator; however the fleet agreement provided an exception to the delegation clause that any claim that the class waiver was “unenforceable, unconscionable, void, or voidable” must be decided by the court. The couriers argued that the court’s authority was limited to claims about the enforceability of the class waiver, so Postmates must raise its objection with the arbitrator. Postmates asserted the exception applied to all claims about the class waiver and was not limited to claims about enforceability.

The court agreed with the couriers. The plain language of the agreement required the court to find that the exception was limited to challenges to the enforceability of the class waiver. The court rejected Postmates’ contention that it should read the exception as illustrating the types of claims that fall within the general carve-out, rather than a restriction. As the court explained, Postmates’ proposed interpretation would make the carve-out for enforceability claims superfluous.

Thus, the court held that the fleet agreement delegated to the arbitrator the exclusive authority to resolve Postmates’ claims that couriers’ arbitration demands violated the class waiver. Therefore, the court granted the parties’ motion to compel arbitration to the extent that the fleet agreement required arbitration of misclassification claims, but declined to examine the merits of Postmates’ request to order the couriers to refile their demands.

Request for fees. The court also denied the couriers’ request for an order requiring Postmates to pay arbitration fees. The AAA rules, which were incorporated into the fleet agreement, state that issues about the payment of arbitration fees must be decided by the arbitrator.

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