After years of litigation, an appeals court held that Uber Technologies, Inc. may legally require its drivers to take any disputes to private arbitration. In Mohamed v. Uber Technologies, the Ninth Circuit Court of California stated that Uber’s arbitration agreements are valid and enforceable, handing a major victory to the company.
Previously in August 2016, in another case against Uber, U.S. District Court Judge Edward M. Chen ruled that the company’s arbitration agreement was “unconscionable and unenforceable” because it required drivers to make claims individually rather than as a class action. Judge Chen went on to state that the arbitration clause was buried in the employment contract and failed to explain the “considerable” fees associated with arbitration. However, in September 2016, the Ninth Circuit of California reversed Judge Chen’s decision stating that the arbitration clause was “clear and unmistakable” and that the opt-out option was not misleading since some drivers did in fact choose to opt-out. Ninth Circuit Judge Richard R. Clifton stated the disputes should have originally been arbitrated and the agreements were not “procedurally unconscionable,” as the lower court held. The appeals panel also stated that Judge Chen lacked the authority to make this decision because the employment contract required “all matters” to be decided by an arbiter.
On December 21, 2016 the Ninth Circuit declined the plaintiffs’ petition for rehearing on this decision and stated that “No further petition for rehearing may be filed,” allowing Uber to pursue arbitration and avoid class actions. This major appellate ruling also gives Uber an upper-hand in renegotiating any lingering litigation. Many will recall that there was a proposed $100 million settlement which Judge Chen rejected, a rejection that would be viewed as a message that there was not enough money in it, and not enough for the State of California’s assessment of penalties.
Even more recently, in March, 2017, Los Angeles County Superior Court Judge Maren E. Nelson rejected a $7.6 million settlement which would have released Uber from PAGA claims in all pending cases against the company. Judge Nelson stated that there was no clear guidance on how to settle representative PAGA claims but both sides failed to even rationalize their settlement processes. The plaintiffs were told to file a supplemental brief including their analysis on the “risks of litigation.” Judge Nelson also told Uber and its counsel to return in May with an improved settlement offer.
Uber also has the opportunity to use this ruling as a basis for seeking arbitration in the proposed class actions alleging the company misclassified drivers as independent contractors. For the first time, Los Angeles County Superior Court Judge Michael L. Stern stated that Uber correctly classifies its drivers as independent contractors. Judge Stern affirmed the 50-page decision from an arbitrator, retired Judge Michael Marcus, due to the evidence presented. Judge Marcus’ decision stated that Uber drivers have more in common with independent contractors rather than employees. Although this is a major victory for Uber, the plaintiffs remain hopeful, stating that this decision “might have an effect but not until there are multiple rulings” in favor of the independent contractor classification.
Those pursuing the misclassification claims against the company are disappointed by the court’s decision but with an appeal pending and the National Labor Relations Board on the plaintiffs’ side, still remain hopeful.