Dive Brief:
- The Federal Arbitration Act does not exempt former and current Uber drivers in the U.S. from arbitrating their wage and hour claims because the drivers are not actively engaged in interstate commerce, the Philadelphia-based 3rd U.S. Circuit Court of Appeals held April 26 in Singh v. Uber Technologies, Inc.
- The FAA’s exemption for transportation workers doesn’t apply to Uber drivers because their “infrequent interstate trips are, on the whole,” not “an essential part of their job,” the 3rd Circuit ruled in two consolidated class-action lawsuits out of New Jersey. In the first case, drivers alleged that Uber violated state law by misclassifying them as independent contractors, not paying minimum wage and not reimbursing them for business expenses, according to court documents. The second case alleged that Uber violated the Fair Labor Standards Act and other labor and employment laws. As a condition of using Uber’s platform, the drivers had signed contracts agreeing to individually arbitrate all disputes that could lawfully be arbitrated, court records said. Uber sought to compel the drivers to arbitrate their claims.
- A federal district court found the drivers’ arbitration agreements were not exempt from the FAA and ordered them to arbitrate their claims. The 3rd Circuit upheld the ruling. The issue was whether the drivers fell within a “class of workers engaged in foreign or interstate commerce,” a “residual clause” under the FAA exempting certain arbitration agreements from being enforced. The clause doesn’t apply to the drivers, the 3rd Circuit held: Their work is centered on local transportation; only 2.5% cross state lines, according to the evidence; and when they do cross state lines, it’s only incidental to Uber’s local transportation business, the court said.
Dive Insight:
The FAA requires federal courts to enforce a wide range of arbitration agreements, except those of specific transportation workers, including “seamen, railroad employees” and the class of workers at issue in this case — workers engaged in interstate or foreign commerce — the 3rd Circuit explained.
In 2021, the San Francisco-based 9th Circuit and the 1st Circuit in Boston came to the same conclusion as the 3rd Circuit — that ride-share/ride-hail drivers (Uber and Lyft drivers, respectively) are not engaged in interstate commerce and must arbitrate claims they were misclassified as independent contractors.
The rulings are important for the gig industry “because exclusion from the [FAA’s] exemption will force [ride-share workers] to individually arbitrate employment claims as opposed to bringing mass class actions,” Alice M. Hodsden, an attorney with Ervin Cohen & Jessup LLP, wrote in a May post.
Over the past few years, Uber has been embroiled a number of misclassification cases, some ending in high-priced payouts.
For example, in September 2022, Uber and a subsidiary paid $100 million to New Jersey’s unemployment trust fund after a state audit found the companies had improperly classified drivers as independent contractors, depriving them of crucial safety-net benefits and not making required contributions to the fund, according to a state press release.
Earlier in 2022, Uber agreed to pay $8.4 million to settle misclassification claims brought under California law by drivers who used the Uber Rides or Uber EATS app in the state and opted out of Uber’s arbitration agreement, the Society for Human Resource Management reported.
Uber has also been plagued by accusations of pervasive sexual misconduct. In 2018, following an ex-engineer’s allegations of sexual harassment that became part of the broader #MeToo movement, the company announced that drivers, riders and employees would no longer have to sign agreements requiring them to arbitrate individual claims of sexual harassment or sexual assault.
Congress has since responded to the outcry over widespread use of such practices. In February, with bipartisan support, federal lawmakers passed the Ending Forced Arbitration for Sexual Assault Act, also called the #MeToo bill. The new law invalidates arbitration agreements that prevent a claimant from filing a lawsuit or seeking redress in court.
