Ninth Circuit Provides Victory for Uber and Arbitration

By Aryeh Mellman, CLS ’20

In a case that has important implications for the future of the gig economy, the 9thCircuit ruled in O’Connor v. Uber Technologies that Uber drivers who were suing to be classified as employees rather than independent contractors could not sue as a class and would have to litigate their claims individually.[1]

The reason for the suit boils down to the differences between employees and independent contractors. Generally, contractors have more flexibility (drivers can work for both Uber and Lyft at the same time and can set their own hours), but employees are legally entitled to a broader set of benefits, including health insurance. In this case, contractors working for Uber also had to sign an arbitration agreement waiving their right to sue Uber as a class, though the agreement did contain an opt-out provision. Notably, the court had previously held in Mohamed v. Uber Technologies, Inc.[2]because it contained an opt-out provision, the arbitration agreement was not unconscionable and gave drivers a real opportunity to exercise that option if they so chose.

The court rejected both of plaintiffs’ lines of reasoning claiming that the arbitration agreements were unenforceable. First, it disposed of plaintiffs’ argument that “the lead plaintiffs in O’Connor had constructively opted out of arbitration on behalf of the entire class” on the grounds that plaintiffs’ sole authority for that proposition rested on a state supreme court case that did not reach federal law.[3]Plaintiffs’ second argument was that arbitration agreements that contain class action waivers, as Uber’s arbitration agreements did, are illegal under the National Labor Relations Act. However, plaintiffs had to withdraw this argument as their position was squarely rejected in Epic Systems Corp. v. Lewis, decided as O’Connor was ongoing.[4]

The class of drivers suing Uber included some plaintiffs who agreed to the arbitration provision, thus waiving their right to participate in a class action. Since the court held the arbitration agreements to be enforceable, they deemed those plaintiffs improperly part of the class and reversed the certification orders.

The decision is a clear victory for Uber, which had at one point agreed to settle with the drivers for $100 million.[5]Conversely, plaintiffs have two unattractive options remaining. They can appeal for an en banc hearing, in which case they would have to win a majority of 9th Circuit judges’ votes just to hear the case and then would have to win on the merits. Alternatively, Uber drivers can litigate their cases individually in arbitration, which plaintiffs’ lawyer has said is already occurring.[6]Of course, litigating thousands of cases individually consumes far more time and resources than litigating as a class. It may also lead to inconsistent judgments, especially since arbitration proceedings are not bound by precedent. Barring a judicial reversal though, that seems to be the only option left available to Uber drivers unhappy with their employment status.

[1]O’Connor v. Uber Technologies Inc., 2018 WL 4568553.

[2]Mohamed v. Uber Technologies Inc., 848 F.3d 1201 (9thCir. 2016).

[3]O’Connor, 2018 WL 4568553, 14.

[4]Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

[5]Andrew J. Hawkins, Uber Scores a Big Win in Legal Fight to Keep Drivers as Independent Contractors, The Verge (September 25, 2018).

[6]Jonathan Stempel,No Class Action for Unhappy Uber Drivers: U.S. Appeals Court, Reuters (September 25, 2018)