Recent Uber Case Strengthens Use of Arbitration Agreements

On September 25, 2018, the Ninth Circuit ruled in favor of Uber, determining that a class action brought by Uber employees could not go forward due to a clause in the parties’ arbitration agreement prohibiting class actions.  While this class of employees can continue to argue they should be categorized as employees rather than independent contractors, they are required to do so alone through individual arbitration proceedings.  This ruling falls in line with a decision by the U.S. Supreme Court in May of 2018 (Epic Systems Corp. v. Lewis), which determined individualized arbitration agreements are an enforceable way to resolve employment disputes between employers and employees, rather than class actions.

While this ruling is not a surprise, and it essentially reiterates the procedural outcome in the Epic Systems case, it does have ongoing implications for employers and employees.  Employees, especially those in the gig industry, now have a tougher battle to fight claims against their employers, as they can no longer rely on the strength of a class action, but must rely only on the specific facts of their own case.  This new obstacle is likely to prompt a change in the way driver misclassification is litigated and will require some creativity by plaintiffs’ attorneys across the country to bring on these claims.  Employers are seen as the direct beneficiaries of these recent rulings, as the change in venue for employees’ claims will likely result in fewer individual claims being brought if class actions cannot be pursued.  More importantly, it continues to legitimize and strengthen an employer’s ability to utilize arbitration agreements to determine the way in which employees can bring certain claims.

WHAT HAPPENS NOW?

 Although employers can rejoice about the continued enforcement of arbitration agreements, they are not cleared of all responsibilities. Employers must diligently review classification of their employees and independent contractors to ensure they are correctly classified.  If not, entities not bound by arbitration agreements can still take legal action by investigating companies for workplace violations and misclassifications. State agency proceedings can go forward despite arbitration agreements. as Additionally,  unemployment benefits, workers’ compensation benefits and state disability insurance can all be sought.  Finally, state attorneys general, or private citizens using private attorney general act statutes in various states, can file lawsuits to try and recover taxes from employers who are believed to have misclassified independent contractors.

Despite these recent rulings, it remains to be seen how they will affect employers outside of the gig economy and outside of California.  It is likely employers throughout the United States will continue to push for enforcement of arbitration agreements, while employees will continue to push for rigid testing and ramifications for misclassifying employees and independent contractors.

If you would like to obtain additional information on the Epic Systems case or California’s new employee/independent contractor testing, please view our past HR Tips of the Week at https://myhrgenius.co/.Otherwise, if you have any questions regarding the information above or would like a review of your employee/independent contractor classifications, please contact your Thompson Coe attorney at (651) 389-5000 or at myHRgenius@thompsoncoe.com.

Thompson Coe and myHRgenius Tip of the Week is not intended as a solicitation, does not constitute legal advice, and does not establish an attorney-client relationship.