LISA NAGALE-PIAZZA – SHRM, October 1, 2018 |
Uber Technologies can force drivers who signed arbitration agreements to bring their employment-related claims individually in arbitration rather than as a class action in court, the 9th U.S. Circuit Court of Appeals ruled.
The ruling is a victory for Uber because it means that the ride-hailing service doesn’t have to worry about a large-scale class action, said Mark Absher, an in-house attorney with ShiftPixy, an app-based company that matches employers with available gig-economy workers. On the flip side, the decision is obviously disappointing to the attorneys that represent the Uber drivers because the cost of individually arbitrating claims could be significantly higher than litigating class claims with pooled resources, he noted.
Uber classifies its drivers as independent contractors, which means that the drivers are not entitled to benefits that are afforded to employees under federal and state laws, such as minimum wages, overtime pay and unemployment insurance. In ongoing class-action lawsuits, Uber drivers have claimed that they were misclassified and should have been provided certain employment rights and benefits.
Uber tried to enforce arbitration agreements—which included class-action waivers—that the drivers had signed. A lower court said the agreements were unenforceable and approved the class action, but the 9th Circuit reversed the ruling on Sept. 24.
The outcome isn’t a surprise after the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis upholding class-action waivers in arbitration agreements. In that case, the high court said that neither the Federal Arbitration Act nor the National Labor Relations Act made class-action waivers unlawful.
It’s important to note that the 9th Circuit’s decision in the Uber case didn’t resolve the underlying issue of whether drivers are independent contractors or employees. Rather, the ruling reaffirmed for employers the value of having an arbitration agreement with a class-action waiver, noted Daniel Handman, an attorney with Hirschfeld Kraemer in Los Angeles.
Uber drivers who signed arbitration agreements will now have to bring their claims before an arbitrator, whereas drivers who opted out of arbitration may still be able to pursue their claims in court.
Tips for Employers
Employers should at least consider whether they want to require workers to sign arbitration agreements with class-action waivers, Handman said. There are pros and cons from an employer’s perspective, but a class-action waiver can be a powerful tool for employers, especially in states where class actions are common and the burden on workers is low to show that a claim should be brought on a classwide basis, he added.
Limiting the threat of class-action litigation can also be beneficial because it enables the parties to focus on the individual worker’s situation and the legitimate claims a particular worker might have, Absher noted.
Now is the time for employers to review their arbitration agreements, said Richard Meneghello, an attorney with Fisher Phillips in Portland, Ore. They shouldn’t rely on the agreements they had in the past or simply download and use an online template, he added, noting that arbitration agreements need to be carefully tailored to the company’s philosophy.
Some businesses may decide not to have arbitration agreements or class-action waivers, he said. But if they want to take advantage of the current state of the law, which permits such agreements, they should work closely with counsel to make sure they have up-to-date, tailored and compliant versions.