Uber Employees Brought Back Into Arbitration

In late July 2016, drivers for Uber Technologies Inc. (“Uber” or the “Company”) lost their bid to have a Maryland federal judge reverse his earlier ruling that the dispute must proceed in arbitration. The drivers filed a class action suit in Maryland late last year, spearheaded by the named Plaintiff, Elizabeth Varon, alleging that they were underpaid and that Company withheld tips. The drivers sought to be compensated for the costs of doing business (gas, car maintenance, etc.), and to be reimbursed for the $1 fee Uber takes off of every fare to pay for background checks on drivers.

Varon had hoped to avoid arbitration, arguing that the arbitration clause in the contract between Uber and its drivers should be evaluated under California law, which they claim would deem the clause unconscionable. The clause dictates that all disputes with the Company must be resolved in arbitration. The Supreme Court of California observes the Armendariz standards when considering arbitration agreements in employment contracts, those standards prohibit any arbitration agreement that is required as a condition of employment. However, California state judicial precedent is superseded by the Federal Arbitration Act (9 U.S.C. § 1). The Federal Arbitration Act protects arbitration agreements in employment contracts.

In his initial May ruling, U.S. District Judge Marvin J. Garbis determined that the arbitration clause was not unconscionable, even if he had applied California law. Judge Garbis noted that Uber had made sufficient efforts to ensure its employees understood they didn’t have to be bound by the arbitration agreement. For example, Uber included a larger font provision in contract that gave drivers 30 days to opt out of the clause.

The ruling that the clause was legal quashed another element of the drivers’ claims. They had insisted the contractual requirement for them to split legal fees with their employer was unconscionable, and that it would represent an excessive cost for them to be represented in arbitration. However, Judge Garbis found that the drivers had agreed to be bound by the clause and were therefore responsible for following its procedure.

The legal team at SFMS has substantial experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact Alec Berin (aberin@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

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Greene, Kat. “Uber Drivers Lose Reconsideration Of Md. Arbitration Order.” Law360. Portfolio Media, Inc. 20 July 2016. Web.