9th Cir. deals blow to misclassification suit from Uber drivers

Dive Brief:

• The 9th U.S. Court of Appeals has reversed a district court decision that denied a motion by ride-hailing service Uber to compel arbitration in a class-action lawsuit brought by current and former drivers. The appeals court also decided that the class certification granted to the drivers by the district court should be reversed (O’Connor v. Uber, No. 14-16078 (9th Cir., Sept. 25, 2018)).
• The drivers had alleged that Uber violated various federal and state statutes by, among other things, misclassifying drivers as independent contractors rather than employees, the court said. In reversing judgment on Uber’s motion to compel arbitration, the court said it relied on its 2016 ruling in Mohamed v. Uber Technologies, Inc. In that case, the court reversed a prior decision denying Uber’s motion to compel arbitration of claims brought by a separate group of drivers. The O’Connor plaintiffs argued that their arbitration agreements with Uber were unenforceable in part because they contained class-action waivers that violated the National Labor Relations Act (NLRA).
• The panel rejected the drivers’ arguments, noting that their NLRA argument was foreclosed by the U.S. Supreme Court’s 2018 decision in Epic Systems Corp. v. Lewis. Further, because the class certification was granted on the premise that the agreements were not enforceable, the court held that the certification “must be reversed.” The panel said that enforceability questions were “not properly for the district court to answer because the question of arbitrability was designated to the arbitrator.”

Dive Insight:

The court’s decision is a huge legal victory for Uber and the heavily financed gig economy space in a circuit that happens to include Silicon Valley, where many gig services are based. It is also a particularly important incidence of a federal court invoking the Supreme Court’s recent decision in Epic Systems.

Moreover, the decision means that individual drivers bound to the type of arbitration agreements described in the suit can bring complaints regarding misclassification only to an arbitrator, according to Mark Absher, an in-house counsel with on-demand workforce management company ShiftPixy. In an email to HR Dive, Absher said complaints resolved in this manner provide no precedent for other litigants, which could prove discouraging for future complaints.

“[A]s a consequence of the court’s decision in O’Connor, Uber will likely face only a handful of complaints by the few disappointed drivers who found lawyers who are willing to arbitrate a single matter to a conclusion that is not likely to yield a meaningful financial benefit for either the litigants or attorneys,” Absher said. “This outcome is obviously of significant benefit to Uber and other comparable businesses that lean on the independent contractor status of their workers and use arbitration agreements.”

Uber recently decided to nix mandatory arbitration agreements for both full-time employees and drivers, but limited that policy to claims of sexual harassment or assault. Experts who spoke with HR Dive did not expect the announcement to cause widespread change on the issue of arbitration agreements within the gig economy context.

In the end, the 9th Circuit’s decision “sidestepped” the substantive issues regarding misclassification, Absher said; “there is no assurance for companies like Uber that the issues will not be explored in other contexts.”