Major Road Block for Uber Drivers Following Ninth Circuit Decision

The Ninth Circuit found that Uber’s arbitration agreements were enforceable, and thereby reversed the lower court’s decision in three pending appeals.

Background: After a district court ruled that Uber’s arbitration agreements were unconscionable, three cases (O’Connor, Yucesoy, and Del Rio v. Uber) were each successful in defeating motions to compel arbitration. All three cases involved Uber drivers who had brought claims against the ride-share company alleging various state and federal labor code violations.

O’Connor v. Uber was originated by two drivers who alleged that Uber was not compensating them the full amount of tips they were receiving from customers. The drivers further alleged that they were misclassified as “independent contractors.”  Due to this alleged misclassification, the drivers were not reimbursed for business expenses. Plaintiffs were also granted certification for a class action.  

Uber appealed O’Connor, Yucesoy, and Del Rio. The Ninth Circuit consolidated all three cases and reversed the lower court’s decision. The Ninth Circuit based its decision on the reasoning in Mohamed v. Uber, and the Supreme Court decision in Epic Systems v. Lewis, decided this past May.

Analysis & Holding: When reviewing a motion to compel arbitration, courts must do so with a “healthy regard for the federal policy favoring arbitration.” When deciding Mohamed v. Uber, the court had determined that the arbitration agreement in question was not adhesive or procedurally unconscionable, and the “opt-out” provisions therein provided the drivers with a meaningful opportunity to do so.

Plaintiffs argued that despite Mohamed’s applicability to the present matter, the lower court’s decision should nonetheless be upheld, because lead Plaintiffs in the class action had opted out of arbitration on behalf of the class as a whole. The Ninth Circuit found Plaintiffs’ argument unpersuasive because there is no precedent that grants lead Plaintiffs the authority to opt out of arbitration on behalf of the class. Because the motions to compel arbitration were improper, the class certification was also reversed, and the cases were remanded.

Significance: This case was a big win for arbitration agreements. As long as the agreements are enforceable, employers should have the power to resolve most labor disputes with employees individually, in arbitration.

To determine which steps you can take to ensure that your arbitration agreements are enforceable, please contact the attorneys at Palmer Kazanjian Wohl Hodson LLP.