Courts Continue to Enforce Arbitration Agreements

On September 25, 2018, the United States Court of Appeals for The Ninth Circuit followed the U.S. Supreme Court’s lead by enforcing class action waivers in arbitration agreements. This a significant win for employers, and Uber in particular.

Uber drivers filed class action suits alleging that Uber and related defendants violated various federal and state laws including 1.) misclassifying drivers as independent contractors (rather than employees) 2.) failing to remit the entire gratuity paid by customers to drivers (California Labor Code § 351), and 3.) failing to pay the drivers’ business expenses, including vehicles, gas, and maintenance (California Labor Code § 2802). Four related actions were before the same United States District Court in the Northern District of California. The District Court denied Uber’s motion to compel arbitration in three lawsuits and granted class certification in one of the lawsuits that included in the class thousands of California drivers who drove for Uber since August 2009.

Uber consolidated the four lawsuits and appealed to the United States Court of Appeals for the Ninth Circuit. In a 3-0 decision, the Ninth Circuit found that:

1. Arbitration agreements are enforceable;

2. Because the arbitration agreements are enforceable, the class certification order previously granted by the lower Court is reversed;

3.  As a result of the first two holdings, various other orders became moot and reversed;

Uber may now communicate with class and putative class members.

Arbitration Agreements Enforceable

Plaintiffs had appealed to the Ninth Circuit with additional arguments, such as, one of the lead plaintiffs (in O’Connor) opted out of arbitration on behalf of the entire class. However, the Court found this unpersuasive because the O’Connor lead plaintiffs lacked authority to bind the other Uber drivers and because there was no federal case law to support that position. Plaintiffs also argued that the arbitration agreements were unenforceable due to class action waivers that violated the National Labor Relations Act of 1935. Notwithstanding, the Court held this argument was already rejected by the U.S. Supreme Court in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) argued October 2, 2017 and decided May 21, 2018.

Class Is No Longer Certified 

The Ninth Circuit reviewed the lower court’s class certification orders and found it was not appropriate to leave the existing class certification orders in place because the certification was premised upon the lower court’s conclusion. The Ninth Circuit reasoned that, as decided in Mohamed v. Uber Technologies, Inc., 848 F.3d 1201, 1208 (9th Cir. 2016), the question of arbitrability was designated to the arbitrator. So, the Ninth Circuit remanded for further proceedings. The class certification orders are no longer in place.

Practical Tips for Employers

Consult with trusted employment counsel to see if an arbitration agreement is suitable. If it is, consider, with advice of counsel, a class action waiver within the arbitration agreement.

If arbitration is your preferred avenue and you and your employee(s) have entered into valid arbitration agreements, raise the right to arbitration early and take steps with your counsel to ensure your company has not waived its right to arbitration.