SAN FRANCISCO (CBS SF) — A federal appeals court ruled in San Francisco Wednesday that most claims by Uber drivers against the ride-booking company must be resolved in arbitration and not through class action lawsuits.
A three-judge panel of the 9th U.S. Circuit Court of Appeals said that arbitration agreements signed by most drivers in 2013 and 2014 were “clear and unmistakable” and were not unconscionable.
Drivers had the choice to opt out of the agreements, although most did not. In the agreements, drivers gave up their right to file class-action or group lawsuits on behalf of all drivers.
The court ruled in a pair of lawsuits filed by two former Uber drivers who challenged the San Francisco-based company’s system of background checks after they were terminated as drivers.
The panel overturned a decision in which U.S. District Judge Edward Chen of San Francisco said the arbitration agreements were not enforceable because they were unclear and unconscionable.
The appeals court’s reasoning on the arbitration agreements is expected to apply to another proposed class-action case pending before Chen.
In that case, drivers are seeking to be classified as employees rather than independent contractors. An employee designation would give them protections such as rights to a minimum wage, overtime pay and reimbursement of expenses.
Chen last month rejected as inadequate a settlement of that lawsuit that would have given 385,000 present and former California and Massachusetts drivers a financial award of between $84 million and $100 million as well as certain benefits.
The benefits would have included a right to receive tips and a way to challenge being fired, but drivers would have remained classified as independent contractors.
Shannon Liss-Riordan, a Boston lawyer representing drivers in that case, said in a statement Wednesday, “Today’s decision is not good for the class.”
“Although it was issued in a different case from mine, the 9th Circuit’s decision endorsed Uber’s attempt to use its arbitration agreement to avoid a systemic challenge to its classification of drivers as employees through a global class action,” she said.
Uber attorney Theodore Boutrous stated, “Arbitration is a fair, speedy and less costly alternative to class-action litigation.
“We’ve always believed our optional arbitration agreements should have applied in this case, and we’re pleased with the court’s decision today,” he said Wednesday.
The ruling still leaves drivers with two avenues for challenging conditions of their work with Uber.
One is through individual proceedings before an arbitrator. Uber has promised to pay the costs of such proceedings, the court said.
Liss-Riordan said her law firm already has more than 1,500 Uber drivers signed up in California to pursue individual arbitrations if necessary.
The second possible path is California’s Private Attorney General Act, known as PAGA, which allows private individuals to sue to enforce employment rights.
The appeals court said the arbitration agreements did not preclude such lawsuits and that a driver could file such a lawsuit as a representative of all drivers.
To win such a case, drivers would have to obtain a judgment that they are employees. When Chen rejected the proposed settlement in Liss-Riordan’s case in August, he said that while there is a risk that drivers could lose their claim to be employees, the total penalty for Uber could be more than $1 billion if the drivers win.
Under the law, 75 percent of that amount would go to the state to fund enforcement of labor laws and 25 percent would go to the drivers.
Liss Riordan said, “The battle is far from over. We still have the appeal pending in our misclassification case, which raises different arguments, and we still have the possibility of massive PAGA penalties under California law.”