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Uber Drivers’ Sick Pay Battle Sent to Arbitration by 9th Cir. (2)

Aug. 2, 2021, 4:03 PM; Updated: Aug. 2, 2021, 7:48 PM

Uber Technologies Inc. drivers from Massachusetts must arbitrate claims that they should be classified as employees entitled to paid sick leave and other wage protections, the Ninth Circuit ruled, avoiding a circuit split on the issue.

The drivers don’t engage in interstate commerce and thus fall outside the scope of an exemption to the Federal Arbitration Act, the U.S. Court of Appeals for the Ninth Circuit held in affirming a California federal judge’s May ruling in favor of Uber.

The majority of gig rides happen within state lines, meaning the drivers don’t qualify for the FAA’s provision that exempts transportation workers in interstate commerce, the panel said.

“Overall, interstate trips, even when combined with trips to the airport, represent a very small percentage of Uber rides, and only occasionally implicate interstate commerce,” wrote U.S. Circuit Court Judge Kim McLane Wardlaw.

Courts have grappled for years over whether gig workers should fall under the arbitration exemption, to mixed results. The question is critical because the exemption would allow drivers to avoid arbitration, which has kept their worker classification disputes out of court.

The Seventh Circuit last August concluded that local gig economy drivers for Grubhub Inc. must arbitrate their claims because they’re not engaged in interstate commerce.

By contrast, 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 Third Circuit in 2019 ruled that Uber or other ride-hail drivers could fall under the FAA’s interstate commerce exemption but didn’t hold that they categorically qualify for the exemption.

The Ninth Circuit “further cemented the inability for Uber drivers to obtain relief from Uber’s systemic violation of wage and hour laws,” said the drivers’ attorney, Shannon Liss-Riordan of Lichten & Liss-Riordan P.C. “I expect we will seek further review from the Ninth Circuit, but the real relief will come when Congress brings some sanity back to this area and ends forced arbitration.”

Uber’s attorney, Theane Evangelis, a partner with Gibson, Dunn & Crutcher, said in a statement: “The Ninth Circuit’s decision correctly enforces Uber’s arbitration agreement and confirms that drivers who use the Uber app do not fall within the Section 1 exemption to the FAA.”

‘Public Injunction’ Issue

The Ninth Circuit also backed the lower court’s order denying the drivers a “public injunction"—as opposed to an arbitrator’s award—compelling Uber to grant sick pay. The drivers said the 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 during the Covid-19 pandemic.

Liss-Riordan said she was shocked the panel didn’t address the argument that depriving workers of paid sick leave is a “public, not just private, issue.”

“The Covid-19 pandemic highlighted the public importance of providing paid sick leave to protect the public at large and not just employees themselves,” she said. “The panel did not even talk about this but instead dropped a gratuitous footnote praising healthcare workers and vaccination rates for stemming the pandemic.”

The appeals court heard the Massachusetts drivers’ case because their proposed class action was transferred from Massachusetts to California based on a forum selection clause in the drivers’ agreements.

The lawsuit filed by the Uber drivers pre-dated last November’s passage of Proposition 22, a $200 million ballot initiative funded by Uber, Postmates, and other gig companies for a carve-out from a California law that made it harder to classify workers as contractors. Courts in ongoing cases in California are grappling over the measure’s backward reach.

Massachusetts employs a similar three-factor test to one used in California that makes it harder for gig companies to defend business models that rely on independent contractors. The test requires an employer to prove three factors before it can classify a worker as a contractor: (A) that the worker has freedom from control over how to perform the service; (B) that the service is outside the business’s normal variety or workplace; and (C) that the worker is engaged in an independently established role.

Gig companies in the state have pushed for a ballot initiative that would allow drivers to be contractors, and the Massachusetts attorney general has litigation pending against Uber and Lyft Inc., accusing the companies of misclassifying their drivers.

The case is Capriole v. Uber Technologies, Inc., 9th Cir., No. 20-16030, opinion 8/2/21.

(Updated to include comments from attorneys for Uber and the drivers.)

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; Andrew Harris at aharris@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com

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