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Uber Drivers Push 9th Cir. to Null Arbitration, Grant Sick Leave

Oct. 16, 2020, 10:59 PM

Uber Technologies Inc. should be forced to classify a group of Massachusetts drivers as employees and grant them sick pay, the workers’ attorney argued before a Ninth Circuit panel in a case that also raises a disputed arbitration issue that could eventually reach the U.S. Supreme Court.

“Although arbitration has become widespread, no appellate court has addressed the stark situation where a company is trying to use an arbitration agreement to prevent an injunction, which is supportive of the public interest, as well as workers, amid a global pandemic,” said Boston-based attorney Shannon Liss-Riordan of Lichten & Liss-Riordan during oral argument Friday. The drivers’ proposed class action was transferred from Massachusetts to California based on a forum selection clause in the drivers’ agreements.

In May, the drivers failed to convince a federal judge in California that a “public injunction” was necessary in their case because Uber’s practice of classifying drivers as independent contractors, who aren’t entitled to paid sick leave, endangered the public. Without the ability to stay home if they’re sick, the drivers said they risk exposing passengers and further spreading Covid-19.

That judge also sent the drivers’ wage-and-hour claims to arbitration, finding that the drivers aren’t engaged in interstate commerce and thus can’t rely on a Federal Arbitration Act exemption. If the U.S. Court of Appeals for the Ninth Circuit overturns that ruling, it could create a circuit split for the Supreme Court to resolve. The issue is crucial for gig economy companies that rely on arbitration agreements to keep drivers’ cases out of court.

Appellate Judge Kim Wardlaw during arguments said she could recognize that the lack of sick pay would lead to health concerns for the public, but questioned how the absence of overtime and wage protections would also pose broader harm to the public and qualify for injunctive relief.

“The sick pay claim is more starkly an issue because it affects the public as well as the drivers,” Liss-Riordan said. She added that the totality of the wage protections, however denied the taxpayers money and other public assistance.

Judge Jacqueline Nguyen asked Uber’s attorney, Theane Evangelis, why a public injunction wouldn’t be appropriate, since anyone in the public can become an Uber driver, and it would therefore affect the public more than a typical wage-and-hour case.

Evangelis of Gibson, Dunn & Crutcher countered that granting the injunction “would be absolutely unprecedented.” She said it would “raise due process concerns to grant that relief at the onset of the case, as well as violate the company arbitration agreement.”

Judge Richard Eaton of the U.S. Court of International Trade also sat on the Ninth Circuit panel.

Arbitration Exemption

On the arbitration issue, Wardlaw grilled Evangelis on whether Liss-Riordan’s claim was true that the company partnered with airlines and helped ferry passengers across state lines to their ultimate destinations.

“I think the nature of the agreement would be important to know about,” Wardlaw told Evangelis.

Liss-Riordan had argued that the FAA’s exemption for transportation workers who engage in interstate commerce should apply to the drivers. She said 10% of Uber’s business involves taking passengers to and from an airport, which represents the “last leg” of the process.

“This isn’t like the food delivery cases where courts have held that food isn’t interstate commerce because the chain is broken when the food reaches the restaurant,” she said. “When a passenger gets off the plane, they aren’t done with their journey until they get to home or to a hotel room. Being transported by an Uber driver is part of that trip.”

Evangelis denied a partnership with airlines, and said it wasn’t even clear from the record that all passengers crossed state lines to their final destinations. She also said all drivers weren’t involved in such rides.

Circuit Split

Evangelis added that a ruling against Uber on the arbitration question would create a circuit split, and upend decisions on the issue in the Ninth Circuit.

The Seventh Circuit ruled in August that GrubHub Inc. drivers don’t fall within the FAA exemption, distinguishing local gig economy drivers from other types of drivers who operate within interstate commerce. For example, the First and Ninth circuits have held that Amazon.com Inc. “last mile” delivery drivers can avoid arbitrating their wage claims because they complete the final leg of deliveries that cross state borders.

The Ninth Circuit will also consider the interstate question in a case involving Lyft Inc. Further, both rideshare companies are grappling with drivers over the issue in cases before the First Circuit.

Arbitration agreements aren’t in play in government enforcement actions against the gig companies. The attorneys general of California and Massachusetts have separately sued Lyft and Uber over classifying its workers as contractors.

A California judge in August ruled in the state attorney general’s favor and ordered the gig companies to classify their drivers as employees. That ruling has been appealed.

The case is Capriole v. Uber Technologies, Inc., 9th Cir., No. 20-16030, oral argument 10/16/20.

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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