Update: Uber’s Misclassification Cases, Arbitration, and the Supreme Court

Independent contractor vs employee Uber misclassification lawsuit arbitration agreements IMG_1111Remember the children’s game called Red Light, Green Light? One ambitious youngster is selected as the traffic cop, who randomly shouts “red light” or “green light,” requiring all the children to run and stop and start in short bursts that would cause an adult human to tear an ACL.

That’s essentially what’s happening in the big Uber misclassification case that has been pending in California since 2014. The case is called O’Connor v. Uber Technologies and is being overseen by traffic cop / federal judge Edward Chen in San Francisco. If anyone ever gets to the finish line, it will eventually be determined whether Uber drivers are properly classified as independent contractors, rather than employees.

There are lots of Uber cases, but this one is the biggie for now, with potentially a billion dollars at issue. For those keeping score at home, that’s 1,000 times more than Dr. Evil demanded for the return of the Kreplachistan warhead.

In December 2015, the judge approved a class of 240,000 drivers, and allowed the case to proceed toward a trial. Green light! Notably, many of the drivers in the class had signed arbitration agreements preventing them from participating in a class action. The judge, however, ruled that the arbitration agreements were unenforceable. He said that the agreement prevented the drivers from engaging in “protected concerted activity” (participating in a class action lawsuit), a right protected under the National Labor Relations Act (NLRA).

Now wait a minute. We have a chicken and egg problem here. The NLRA only applies to employees. If the drivers are truly independent contractors, the NLRA does not apply, and the validity of the arbitration agreements should not be an issue. Uber filed an immediate appeal, claiming that the agreements are valid and that judge should not have allowed the case to proceed as a class action. (Red light?)

In April 2016, the Ninth Circuit Court of Appeals agreed to hear Uber’s appeal.

Meanwhile, Judge Chen allowed the case to proceed toward trial, despite the appeal. Green light! But both sides flinched (Red light!), and the case settled for $100 million.

But wait. A judge must approve a class settlement. This judge ruled the settlement was unfair to drivers since the actual recovery in trial could be much greater. (Hey, isn’t that the point of a settlement? The drivers also might have taken home nothing!) Anyway, Green light!

Meanwhile, back at the Ninth Circuit, the appeals court issued an order last week that said, “Hey, everybody wait.” Red light!

The Court of Appeals noted that the U.S. Supreme Court is about to decide whether employee arbitration agreements that waive the right to participate in a class action are permissible, or whether they violate the NLRA. That’s the same issue that led Judge Chen to call “Green light!” in 2015 and certify the class of Uber drivers. The Supreme Court’s decision will likely govern whether the Uber drivers’ arbitration agreements are valid.

On October 2, the Supreme Court will hear oral arguments on this issue, and a decision is expected in the first half of 2018. The Supreme Court’s decision will have far reaching consequences for all businesses who ask their workers to sign arbitration agreements waiving the right to trial and waiving the right to participate in a class action.  So far, courts around the country have split on this important issue, reaching different conclusions about whether these agreements are allowed. The Supreme Court decision will settle this issue for everybody.

The Supreme Court case, called NLRB v. Murphy Oil USA, will be one of the more significant employment law decisions from the Supreme Court in a long time. You can read more here from SCOTUSblog or here from Baker Hostetler blogs.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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