Uber, Lyft Face Long Odds to Force Labor Claims Into Arbitration

Lyft Inc. and Uber Technologies Inc. on Thursday met resistance from California appellate justices, who indicated that state law permits individuals to sue on the state’s behalf for labor law violations even if the workers must arbitrate their individual claims.

In oral arguments for a pair of cases involivng the ride-sharing companies, the Second District Court of Appeal made clear that the last word on state law is the California Supreme Court. The high court hasn’t yet scheduled arguments in a separate case involving Uber, concerning whether a worker who brings labor law violations under the Private Attorneys General Act can continue to represent a class of gig workers alleging misclassification after the plaintiff’s individual claims were sent to arbitration.

The Second District justices appeared skeptical of arguments by Uber and Lyft that the US Supreme Court’s ruling in a case involving Viking Cruises Inc. means an individual worker who signed an arbitration agreement can’t possibly have standing to sue on behalf of others under PAGA. The high court held that workers who signed arbitration agreements and then brought PAGA lawsuits must arbitrate their individual claims.

“As you know, this court is not bound by the analysis set forth in Viking River if our Supreme Court decides as a matter of state law to go another way. We don’t have that ruling yet,” Associate Justice Audrey B. Collins told Lyft’s counsel, Peder K. Batalden with Horvitz & Levy LLP.

Nevertheless, looking at state law and cases, “in my view, at least, review of those matters leads me to believe that plaintiff is not stripped of his standing, he has not lost his standing to pursue the nonindividual PAGA claims simply because his individual claim is now compelled to go to arbitration,” Collins said.

Rulings in the closely watched cases, due within 90 days, could implicate California’s ability to deputize workers to pursue wage claims and split the remedies with the state.

Misclassification Fight

Uber and other gig employers have argued that their workers are independent contractors and not employees who under the state wage laws would be entitled to overtime pay, worker’s compensation, and other benefits. California courts in a line of cases starting with a 2014 state Supreme Court ruling consistently have held that PAGA claims are not subject to arbitration because they are claims brought on behalf of the state.

The worker whose individual claims are sent to arbitration “is still aggrieved,” Collins told Uber’s counsel, Theane Evangelis with Gibson, Dunn & Crutcher LLP. That the claims “are now going to be settled in two different forums does not strip him of his standing,” the justice said.

The only requirements of PAGA, Collins said, are that the plaintiff be an aggrieved employee against whom one or more of the violations was committed.

Los Angeles Superior Court Judge Natalie P. Stone, sitting pro tem on the panel, told Evangelis that just because the individual claim is being litigated in one forum “doesn’t mean it evaporated. It’s still being litigated in a different forum, but it’s not disappeared.”

All the cases involve PAGA claims for misclassification, failure to pay overtime, and failure to provide meal and rest breaks under California labor law. The lead case before the California Supreme Court involves Uber and centers on whether a worker must first get an arbitrator to rule on whether the individual is an employee or independent contractor.

Acting Presiding Justice Brian S. Currey was the third member on the panel.

Littler Mendelson also represents Uber. Kekker, Van Nest & Peters LLP also represents Lyft. Litchen & Liss-Riordan PC represents the Lyft workers. Outten & Golden LLP and Schultz & Bennett Ltd. represent the Uber workers.

The cases are Seifu v. Lyft Inc., Cal. Ct. App., 2d Dist., No. B301774, oral arguments 3/9/23 and Gregg v. Uber Techs. Inc., Cal. Ct. App., 2d Dist., No. B302925, oral arguments 3/9/23.