Great news for gig economy businesses from an Illinois federal court: a judge recently ruled that Grubhub’s delivery drivers were not operating in “interstate commerce,” and therefore were not excluded from the company’s mandatory arbitration agreement. The March 28 ruling is one of the first decisions on this subject following January’s Supreme Court ruling casting this issue into doubt. While the fight is not over, round one goes to gig economy companies.
The $100 million settlement announced Monday by a transportation company to resolve a long-running misclassification claim might be the direct result of a January Supreme Court decision, and might be a troubling harbinger of things to come for many gig economy businesses. Swift Transportation paid the massive sum to a group of drivers who claimed they were improperly classified as “owner-operator” contractors when they should have been treated as employees, but only agreed to the deal after it became clear that recent legal precedent from the SCOTUS meant that they could not resolve the dispute in arbitration. What does this settlement signal for gig economy businesses in general?
Ever since Uber became part of our everyday world, the mandatory arbitration agreement it requires its independent contractor drivers to sign has been under constant scrutiny—and attack. A recent decision, however, fell in the gig economy company’s favor, presenting a good lesson for all gig economy companies.
After the Supreme Court ruled a few weeks ago that independent contractors working “in interstate commerce” were exempt from arbitration pacts due to a broad interpretation of the Federal Arbitration Act (New Prime v. Oliveira), I wrote a blog post about how labor law commentator Ross Runkel wondered whether gig business ride-share drivers and others would be able to extend that ruling in their favor and escape typical arbitration agreements. National Law Journal’s Erin Mulvaney followed this thinking by writing an article recapping how gig economy plaintiffs will soon be test-driving the New Prime decision to see if it can work in their favor. As she says, “already in the weeks since the ruling was issued, there are signs plaintiffs lawyers will use the opinion to reinforce their arguments that drivers who signed arbitration agreements should nonetheless be allowed to sue their employers in court.”
My colleagues Andy Scott and Felix Digilov reported on last week’s Supreme Court decision that rejected a trucking company’s effort to force its drivers to arbitrate their wage and hour claims against the company, despite the fact they had signed otherwise enforceable arbitration agreements (New Prime Inc. v. Oliveira). The reasoning behind that ruling? The SCOTUS held that the Federal Arbitration Act’s exemption that excludes “contracts of employment of workers engaged in interstate commerce” includes not only interstate transportation workers with employment agreements, but also those interstate transportation workers with independent contractor agreements. Now, a prominent labor law commentator posits whether this same decision could cause trouble for Lyft, Uber, and other gig economy companies.
On the eve of the holidays, gig businesses got a gift in the form of a ruling from a Massaschusetts federal court where a clickwrap agreement was held to be sufficient to bind a worker to an arbitration clause. The ruling in favor of Lyft will not necessarily help all businesses across the country—especially because the court specifically pointed out that his ruling might have been different had he been applying California or New York law—but it does continue the trend of holding workers to the terms of an electronic arbitration agreement.
A recent decision from a federal court in California shows that there is a simple three-step process to follow if you want to ensure that your gig workers are found to be subject to your arbitration provisions. The judge’s December 17 opinion in a misclassification case against Postmates provides a classic blueprint that you might to consider adopting for your own business.
Airbnb Inc. recently announced it would no longer force its employees who filed sexual harassment lawsuits to settle their claims in private arbitration. The notice came only days after Google and Facebook made similar announcements concerning policy changes about sexual harassment, including ending forced arbitration for such claims. Google’s announcement followed a 20,000 employee walkout protesting the company’s handling of sexual misconduct allegations. As previously discussed on the blog, in May of this year, Uber and Lyft became two of the first gig companies to waive mandatory arbitration and remove the confidentiality requirement for sexual assault and harassment victims (for passenger, driver and employee claims).
It was just a matter of time. After the Supreme Court cleared the way for businesses to use class waivers with their employees and contractors with the Epic Systems ruling this past May, many observers expected that the decision would come back to haunt a class of Uber drivers who wanted to litigate a class action misclassification case against the ride-sharing company in court. Earlier today, sure enough, the other shoe dropped.
When the Supreme Court decided this May that businesses were permitted to enter into class waiver agreements with employees and contractors, forcing them into individual arbitration proceedings over workplace disputes rather than having to be subjected to bloated and costly class action litigation, we called it a “monumental” decision that “saved employment arbitration as we know it.” For businesses in the gig world, we now have a definitive example of just how valuable the SCOTUS’s new standard can be when it comes to misclassification cases.