Labor & Employment Law Daily Uber drivers must arbitrate their misclassification dispute despite pandemic
Tuesday, May 19, 2020

Uber drivers must arbitrate their misclassification dispute despite pandemic

By Georgia D. Koutouzos, J.D.

The drivers were denied a public injunction compelling their reclassification as employees instead of independent contractors based on public health consequences.

Drivers for the ridesharing giant Uber failed in their attempt to litigate via a class action lawsuit claims that their misclassification by the company as independent contractors has, among other things, forced them to continue working during the COVID-19 crisis even while ill in order to support themselves. Denying the drivers’ motion for a preliminary injunction compelling Uber to reclassify them as employees entitled to minimum wages, overtime, and sick leave, a California federal court ruled that Uber’s 2015 and 2020 services agreements mandate that such claims be arbitrated on an individual basis, that the drivers did not fall into the Federal Arbitration Act’s exception for transportation workers, and that they did not establish a basis for a public injunction necessitating judicial action (Capriole v. Uber Technologies, Inc., May 13, 2020, Chen, E.).

Three Uber drivers filed a putative class action against the company to compel it to comply with Massachusetts law and classify its drivers as employees. As a result of Uber’s alleged misclassification of drivers as independent contractors, they have been forced to bear the expenses of their employment, been denied Massachusetts minimum wage for hours worked, deprived of overtime pay, and denied paid sick leave, the drivers asserted, adding that many drivers are being forced to continue working in order to support themselves even while potentially sick with COVID-19. Contending that those circumstances pose an immediate danger to both themselves and the general public, the drivers sought a preliminary injunction to prohibit the company from classifying drivers as independent contractors and to compel their reclassification as employees.

Binding arbitration. Uber responded with a motion to compel arbitration, citing arbitration provisions contained in its 2015 Technology Services Agreement and its 2020 Platform Services Agreement that require resolution of drivers’ disputes with the company through binding arbitration on an individual basis rather than as a class. Although both arbitration agreements contain an opt-out provision, only one of the three individuals had opted out of the 2020 agreement, which provides that if an individual opts out of that provision but was bound by an existing agreement to arbitrate disputes, then the existing agreement remains in full force and effect.

FAA’s applicability. The drivers contended that the Federal Arbitration Act—and its liberal policy favoring arbitration—is inapplicable to their claims because the workers fell into the Act’s exception for transportation workers. To prove that the exception applied, the drivers had to establish the existence of a contract of employment and that they were part of a class of workers engaged in foreign or interstate commerce. To bring themselves within the meaning of “engaged in interstate commerce,” the drivers alleged both that Uber workers sometimes cross state lines while transporting passengers and that they frequently pick up and drop off passengers at airports, thereby placing themselves within the flow of interstate commerce.

Interstate transport deemed incidental. The court found that the relevant inquiry was not whether an individual driver had crossed state lines, however, but whether the class of drivers crosses state lines. In that regard, Uber provided evidence that only 2.5 percent of drivers’ trips between 2015 and 2019 had started and ended in different states. As for the drivers’ contention regarding airport rides, Uber data showed that 10.1 percent of all trips taken in the United States in 2019 began or ended at an airport. Acknowledging a split between prior caselaw regarding the statutory exception’s applicability to similarly situated rideshare drivers, the court in the instant case found that the drivers did not fall within the FAA’s exception because the statistics cited by Uber demonstrate that interstate rides given by Uber drivers not only were incidental, they were rare; therefore, the drivers did not perform an integral role in a chain of interstate transportation.

Arbitrability issue. The drivers contended that even if the FAA’s exception didn’t apply to them, the relief they were seeking constituted a public injunction that could not be waived by an arbitration agreement. Addressing the arbitrability of the issue, the court noted that the parties’ 2015 agreement contained a broad delegation clause requiring that all disputes be resolved by an arbitrator, even including those pertaining to “the enforceability, revocability or validity of the Arbitration Provision.” However, it also provided that “disputes regarding the enforceability, revocability or validity of the Class Action Waiver may be resolved only by a civil court of competent jurisdiction and not by an arbitrator.”

Public injunction. Given the drivers’ contention that the sought-after relief constituted a public injunction, it essentially was equivalent to a collective or representative action that was a matter to be resolved by the court. The drivers were seeking a public injunction under Massachusetts law, however, and the Commonwealth’s wage act provides no provisions for public relief (the two Uber agreements contained choice-of-law provisions specifying that Massachusetts law was applicable to disputes thereunder). Recognizing that the drivers’ argument that the classification of error allegedly committed by Uber has enormous public consequences, the court stated that no other judicial forum has thus far held that such indirect consequences—even if established as a matter of fact—rendered the drivers’ suit one for public injunction. Accordingly, the court compelled the drivers’ claims to arbitration and denied their motion for a preliminary injunction.

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