Labor & Employment Law Daily Uber drivers operating at airports not exempt from provisions of FAA under residual clause
Thursday, September 10, 2020

Uber drivers operating at airports not exempt from provisions of FAA under residual clause

By Ronald Miller, J.D.

Because Uber is in the general business of giving people rides and didn’t focus on “the service of transporting people to and from airports,” it did not fall within the FAA’s § 1 exemption.

Uber drivers who pick up and drop off passengers at airports do not fall within the residual category of transportation workers, and therefore may be judicially compelled to arbitrate their claims that the rideshare company failed to safeguard their personal information in accordance with the terms of their contracts, ruled the Ninth Circuit. The appeals court concluded that the district court’s decision was not “clearly erroneous as a matter of law,” as required for granting a writ of mandamus, because no prior Ninth Circuit authority prohibited the district court’s ruling, and the issue in question had not yet been addressed by any circuit court in a published opinion (Grice v. United States District Court for the Central District of California, Los Angeles, September 4, 2020, Callahan, C.).

Data breach. In November 2017, a rideshare driver filed putative class action against Uber, alleging that the company failed to safeguard his and other Uber drivers’ and riders’ personal info and mishandled a data security breach in which that info was stolen by online hackers. Uber moved to compel arbitration citing the agreement the drivers signed requiring arbitration of any disputes. For his part, the drivers argued he “driv[es] passengers (who are engaged in interstate travel) and their luggage to and from airports” and therefore qualifies for the FAA’s § 1 exemption. The district court disagreed and compelled arbitration.

The driver petitioned the Ninth Circuit for a writ of mandamus vacating the district court’s referral to arbitration.

Residual clause. Section 1 of the FAA exempts from the Act’s coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce“—§ 1’s “residual clause.” The Supreme Court has narrowly interpreted the residual clause as covering “only contracts of employment of transportation workers.” The Ninth Circuit has described the residual clause as applying to “the contracts of employees who actually transport people or goods in interstate commerce.” The critical factor is “[t]he nature of the business for which a class of workers perform[ed] their activities.”

Rideshare drivers. Next, the appeals court turned to consider whether rideshare drivers fell within the FAA’s residual clause. Here, the district court concluded that rideshare drivers were not part of a group engaged in foreign or interstate commerce, and so did not fall within the § 1 exemption. Uber is not focused on “the service of transporting people to and from airports,” rather, the company is in the general business of giving people rides.

In this instance, the driver did not allege that he provides rides only, or even primarily, to individuals coming from out-of-state. Moreover, he cited no circuit precedent holding that rideshare drivers, as a class, are “engaged in foreign or interstate commerce.” Further, the driver provided neither evidence nor caselaw to support his claim that “Uber is clearly in the business of providing transportation services and is engaged in interstate commerce.” Contrary to the driver’s understanding, “the residual exemption is … about what the worker does,” not just “where the goods [or people] have been.”

Given the lack of controlling precedent forbidding the result, the Ninth Circuit was not firmly convinced that the district court erred in compelling arbitration of the driver’s claims. Accordingly, because the driver had not met his burden of showing a clear and indisputable right to issuance of a writ of mandamus, his petition was denied.

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