Uber, the popular online transportation company, was handed a major win last week when a federal appeals court ruled the company’s arbitration agreements are valid and enforceable. The decision follows numerous lawsuits filed by Uber drivers who argued that they should be treated as employees rather than independent contractors.
When drivers initially engage with Uber, they are required to sign an agreement stating that any disputes will be resolved through private arbitration. This arbitration agreement allows the company to challenge the driver one-on-one rather than dealing with potential class-action suits. Large employers such as Uber prefer arbitration because it is, they contend, less expensive and more efficient.
The U.S. Court of Appeals for the Ninth Circuit ruled on September 7 that an arbitrator, not a federal judge, must decide whether the arbitration agreements are enforceable. Arbitrators have the right to make this decision because drivers knowingly signed a contract with Uber and were able to opt out of the standard contract, which few did.
However, the arbitration clause is buried in Uber’s contract and is not clear to all drivers who sign it, according to Professor Jacqueline Nolan-Haley, who teaches alternative dispute resolution and mediation courses at Fordham Law.
“Not all Uber drivers were aware of what they were consenting to—that they were agreeing to arbitrate,” Nolan-Haley said.
“There is a robust debate in the field of dispute resolution regarding whether mandatory pre-dispute arbitration clauses in consumer and employment cases are good or bad,” the professor said. “Some people argue that it is unfair to require arbitration when there is unequal bargaining power—for example, when a driver is up against a company like Uber.”
In general, large corporate entities favor mandatory arbitration, while individual employees or contractors prefer their day in court. By pushing these cases out of court and into private arbitration, the possibility for unfairness increases, Nolan-Haley said.
She is not surprised, however, by the recent ruling from the court.
“Many Supreme Court cases in recent years have supported mandatory arbitration clauses. So, unless the Supreme Court changes its direction, we are going to continue to see mandatory arbitration agreements as an almost sacred dispute resolution technique,” Nolan-Haley said.
Additionally, “other business will likely take a hold of this decision and follow in Uber’s footsteps, using mandatory arbitration clauses to their advantage,” she predicts.
