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How Uber is Using Fine Print Arbitration Clauses to Deny Workers’ Comp and other Protections to Millions of Workers

August 18, 2016

Perhaps unsurprisingly, two issues that particularly concern us as advocates for injury victims have come together in recent weeks – and not in a good way.

 

Uber, the Gig Economy, and Workers’ Compensation

In a column for the New Castle County Women’s Journal last fall, Kimmel Carter Partner Heather Long discussed the tendency of “on-demand,” or “gig economy” companies (think Uber, Lyft and Task Rabbit) to deny traditional protections to their workers, including workers’ compensation and overtime pay.

 

Often, these largely Silicon Valley-based employers pull this off by classifying their vast, virtual labor forces as independent contractors, a category of workers that are not guaranteed the same protections as official employees under federal and state laws. In her article, Heather zeroed-in specifically on the lack of workers’ comp provided for drivers with the car service Uber, which is generally regarded as one of the most influential and successful on-demand companies on the market.

 

As you might expect, there are a lot of people who are not happy with the methods that Uber and its peers are using to launch their “workplace revolution.” Among those who are less than thrilled: a group of more than 350,000 Uber drivers in Massachusetts and California, who have been fighting the company for the past three years in a class action led by labor lawyer Shannon Liss-Riordan.

 

The drivers’ demands include retroactive payments for the benefits that they would have received from Uber if they were classified as employees, including compensation for fuel and other work-related expenses, overtime pay, and, of course, workers’ compensation (which is no small matter, by the way, for workers in one of the most dangerous industries in the country).

 

Forced Arbitration Rears its Ugly Head

According to Bloomberg Technology, the Uber class-action case came to a head last month, when representatives from the company made a firm, take-it-or-leave-it demand regarding a settlement offer that was announced in April.

 

At issue is an order that the U.S. District judge overseeing the case, Edward Chen, made last year, asking Uber to change the language of the arbitration agreements in its driver contracts. Uber officials have communicated that they will happily walk away from the offer on the table, which would award $100 million to the drivers, unless Chen backs down from his order, allowing their current arbitration clauses to stand.

 

Like other such agreements, which are present in the fine print of everything from routine employment contracts to credit card sign up forms, Uber’s arbitration clauses all but guarantee that its drivers are barred from suing Uber in court, or from forming a class action in the event that they have a dispute with the company.

 

The only recourse we have when we sign documents with these kinds of clauses is to go to private arbitration hearings, which are likely to occur outside of the public eye and to be conducted by an arbitrator who has a financial incentive to rule in favor of the corporation, university, or other powerful institution that issued the contract.

 

With the scales tipped so heavily in favor of the larger, more influential party, individual citizens don’t usually fare well in arbitration. And because arbitration clauses frequently bar individuals from joining together in class actions, they also rob us of perhaps the best tool we have to fight abuse from major corporations – collective pressure.

 

In fact, the drivers in the case in California were only able to form a class action against Uber because their attorney found loopholes in the company’s early arbitration agreements. Naturally, Uber tightened the language of their contracts after the Liss-Riordan and her team exploited the gaps, ensuring that it is now virtually impossible for drivers to sue Uber for benefits in court.

 

This current language is what Chen would like the company to remove, arguing that it violates the drivers’ legal rights.  Unfortunately, he may be facing a losing battle. With Uber standing firm, Chen risks the settlement totally falling apart if he doesn’t change his mind about the arbitration clauses, leaving the drivers with nothing. Further constraining Chen is the fact that an appeals court panel tasked with examining his order “gave strong hints” that it will allow Uber to continue enforcing its arbitration agreements as they stand.

 

Fighting the Good Fight

Chen’s fixation on Uber’s arbitration clauses may seem excessive to some, but it’s likely that he realizes that the outcome of the class action will have far-reaching implications, and that forced arbitration is a serious threat to millions of on-demand workers at Uber and beyond.

 

While the use of independent contractors is not, in itself, problematic, and Uber and other similar enterprises have no doubt improved our lives in innovative, exciting ways, the on-demand model is still young. Like any young idea, it comes with both unique solutions and unique problems.

 

There are surely ways to work those problems out – but until we do, it’s essential that workers have a pathway to address their grievances in a way that is both legal and just. Forced arbitration is not that pathway.

 

Magnifying the specter of forced arbitration for gig economy workers is the fact that on-demand companies are commonly regarded as the future of the U.S., and possibly global, economy. An issue impacting workers at just a few companies may seem relatively minor – can’t they just get another job if they want better benefits? – but in several decades, most of us could be working for employers that utilize the on-demand, independent contractor model.

 

Again, there’s no need to write the on-demand model off as a whole. But Judge Chen and others are right to not to let these huge, highly profitable companies off the hook for benefits that are considered fundamental rights for American workers.

 

If we allow Uber, Lyft and their cohorts to continue to skirt U.S. labor laws, classify their workers as contractors, and hide behind forced arbitration now, we will set a dangerous precedent for years to come. Chen may be up against a strong opponent, but we hope he keeps fighting.

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