9th Circuit Hears Arguments in Uber Driver Class Actions

Appeals court will wait for U.S. Supreme Court ruling on class-action waivers

Lisa Nagele-Piazza, J.D., SHRM-SCP By Lisa Nagele-Piazza, J.D., SHRM-SCP September 26, 2017
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Did Uber's arbitration agreements with drivers violate the National Labor Relations Act (NLRA)? That's one question that was debated before the 9th U.S. Circuit Court of Appeals in the closely watched Uber driver misclassification lawsuits. But the appeals court will wait for a pending U.S. Supreme Court ruling before deciding the issue.

The consolidated cases before the 9th Circuit raise the same essential question: Were Uber drivers misclassified as independent contractors? If they were actually employees, they should have been afforded certain benefits like minimum wage, overtime pay and expense reimbursement.

However, when many drivers signed up with the ride-hailing service, they agreed to arbitrate such claims instead of bringing lawsuits in court. Those arbitration agreements also contained class-action waivers—meaning that each driver would have to individually resolve his or her dispute rather than do so collectively.

Judge Edward Chen of the U.S. District Court for the Northern District of California struck down certain Uber arbitration agreements, finding that they were unconscionable and unenforceable. Uber appealed and asked the 9th Circuit to enforce the agreements.

During oral arguments on Sept. 20, an attorney for the drivers, Shannon Liss-Riordan of Boston-based Lichten & Liss-Riordan, asked the appeals court to uphold the district court's ruling—but on different grounds.

"We aren't pressing unconscionability," she said. Instead, she argued that the arbitration agreements are unenforceable under the NLRA because the class-action waivers violate the drivers' right to engage in concerted activity.

It's important to note that the arbitration agreements had an opt-out provision—meaning that drivers could decide not to be bound by the agreements if they followed certain procedures.

"The biggest problem the class has is that the 9th Circuit has already made multiple pronouncements about this kind of opt-out provision," Jim Evans, an attorney with Alston & Bird in Los Angeles, told SHRM Online. "As long as it's voluntary, that kind of agreement is going to pass muster," he said.

Theodore Boutrous Jr. of Gibson, Dunn & Crutcher, an attorney for Uber, argued just that. "No circuit court has ever found that the NLRA precludes voluntary opt-out of arbitration provisions," he said.

Evans said it is impossible to predict with certainty, but overall, the three-judge panel seemed more receptive to Uber's arguments than the drivers'.

[SHRM members-only HR Q&A: What are the California rules regarding mandatory arbitration agreements and how do they differ from federal law?]

The lead case in the consolidated class actions, O'Connor v. Uber Techs. Inc., has been pending since 2013 and was almost settled (along with another case) for $100 million last year. But Chen said the settlement wasn't fair, adequate and reasonable for the drivers—particularly because the dollar amount represented a small part of the drivers' alleged damages.

Prior Ruling

This isn't the first time the 9th Circuit has been asked to determine whether Uber drivers' arbitration agreements are enforceable.

In September 2016, the appeals court found that an arbitrator should decide the threshold question of arbitrability. The 9th Circuit pointed to a "delegation clause" in the contracts through which the parties agreed that an arbitrator, not a judge, would resolve their disputes. However, that ruling only applied to one of the four consolidated cases. Thus, Uber asked the appeals court to find that all the remaining disputes must be resolved by an arbitrator. 

During the Sept. 20 oral arguments, Liss-Riordan said that compelling an individual to arbitrate the question of whether a worker is an employee—and therefore has rights under the NLRA—would itself violate the NLRA.

Uber Pushes to Decertify Class

Uber also asked the 9th Circuit to decertify a class of drivers. Boutrous said the litigation involves a wildly disparate group of people. He argued that it isn't possible at trial to make a determination in one stroke—for the whole class—as to whether every one of the drivers was an employee or an independent contractor.

The judges challenged that assertion by pointing out that, while drivers can craft their relationship with Uber, they can't negotiate with the person they are driving, since Uber sets the fares and other terms.

But Boutrous argued that Uber's platform is just one mechanism drivers used to get clients. The record shows that some plaintiffs are professional drivers, some give their personal cards to passengers, and some drive for Lyft and other ride-hailing services.

Awaiting Supreme Court Ruling

The judges repeatedly asked why they should make a decision on the appeal while a critical Supreme Court decision on class-action waivers is pending.

The high court will rule on a trio of cases that ask whether class-action waivers in arbitration agreements are lawful. One of those cases, Morris v. Ernst & Young, 5:12-cv-04964 (9th Cir. 2016), challenges a 9th Circuit decision finding that an employer's particular agreement did violate the NLRA.

The Supreme Court is scheduled to hear oral arguments in those cases on Oct. 2. In light of this, the 9th Circuit issued an order on Sept. 22 stating that it will put the Uber litigation on hold while the Supreme Court cases are pending.

Still a Valuable Tool

Employers may wonder if it's a good idea to adopt an arbitration agreement given all of this uncertainty, Evans said. He thinks such workplace agreements are still a valuable tool. "But the devil is in the details," he cautioned.

Employers should work with counsel to craft solid agreements. Arbitration can benefit employers and employees alike, Evans said. "For one thing, it can be faster and cheaper for both parties," he said.

 

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