The U.S. Court of Appeals for the Ninth Circuit ruled yesterday that drivers for the alt-cab company Uber have to arbitrate claims against the company. The decision means that those drivers are out of court on most of their claims, but also that they cannot proceed on a classwide basis. The case is Mohamed v. Uber Technologies.
The cases involve claims under the Fair Credit Reporting Act and state-law analogs (based on Uber's use of information in credit reports to terminate drivers) as well as under wage and hour laws (based on arguments that Uber misclassified drivers as contractors rather than employees). One silver lining for the drivers: The court held that a driver who signed an older version of Uber's arbitration agreement can proceed in court with a representative action under California's Private Attorney Generals' Act (PAGA).
In a nutshell, the court held that under Uber's arbitration clause, drivers who did not opt out agreed to arbitrate all their claims against Uber, including claims that the arbitration agreement itself is unenforceable. In the 2013 version of the agreement, the provision requiring arbitration of unenforceability claims (called a "delegation clause") had a carve-out allowing claims about the enforceability of the agreement's waiver of PAGA representative action claims. Because California and Ninth Circuit precedents hold such PAGA waivers unenforceable, the driver who had signed only the 2013 version was permitted to proceed with his PAGA claim, which can seek penalties for violations involving other drivers who are subject to arbitration agreements. Thus, Uber still faces the possibility of a very large PAGA case in court.
However, the decision that claims of other Uber driver have to be arbitrated may, if it holds up, put a monkey-wrench into efforts to achieve a nationwide class action settlement to replace the one rejected by a federal district court last month.
Other key features of the decision: The court holds that under California law, an arbitration agreement with an opt-out clause can virtually never be unconscionable (a holding contrary to the California courts' own interpretation of their law). Moreover, a footnote finds that an opt-out provision is also a sufficient basis for holding that an otherwise mandatory arbitration clause does not violate workers' right to engage in concerted action under the NLRA, notwithstanding last month's Ninth Circuit ruling that arbitration agreements involving employees otherwise run afoul of the NLRA.
