The Benefits of Mandatory Binding Arbitration Agreements With Class Action Waivers

From Fisher Phillips, Bob Yonowitz and Danielle Garcia discuss the benefits of arbitration agreements for companies in the gig economy.  They write:

Arbitration agreements with class action waivers can be one of the most valuable tools for employers when being presented with employment claims, and this can seamlessly transfer over to Gig companies, as the Gig Economy will undoubtedly be presented with more “employment-style” lawsuits in the near future.

Arbitration agreements with class action waivers may take the uncertainty out of employment lawsuits by requiring that the parties litigate any claims arising out of their relationship in private arbitration while also doing so individually. Arbitration is similar to a traditional trial in that rules of evidence and procedure are followed. The case is that also presented before either a retired judge or an experienced arbitrator. The largest difference is the absence of a jury. The benefit for the employer or Gig platform is that the retired judge is a learned jurist with years of experience, and does not view the case as emotionally as would a jury. This argument in support of arbitration is bolstered by the fact that the plaintiffs in the Uber case moved for a bench trial based on the theory that a San Francisco jury would be biased in favor of Uber, due to Uber’s popularity in that city.46 The arbitrator is completely neutral, and has years of experience applying the law to the facts at hand to come to a rational, nonemotional resolution. Workers sign an acknowledgement affirming not only that will they assert all claims relating to their relationship with the platform in arbitration alone, but also that they will not assert claims on behalf of any other workers. The benefit here is that workers are required to litigate any employment-style claims on an individual basis instead of one disgruntled worker bringing an action on behalf of several thousand other workers (many of whom likely wouldn’t have wanted to sue the Gig platform in the first place). With class action waivers, there is only one person with one dispute, and the arbitrator will look at remedies for only that one individual. To be clear, arbitration agreements with class action waivers offer dual protection to Gig companies: one being the removal of an emotional jury who is not as familiar with the law, and the second keeping litigation narrowed to the one aggrieved employee.

We have seen examples of Gig platforms implementing arbitration agreements with class action waivers, which makes sense, because we can only expect to see more of these employment-type lawsuits while the employment classification of Gig workers remains up in the air. For example, Uber instituted arbitration agreements with class action waivers before any litigation was filed against it in 2013.47 The judge ruled that Uber’s 2013 arbitration agreement was not enforceable due to being substantively and procedurally unconscionable.48 Specifically, the judge found that under California law, the arbitration agreement was unenforceable as a matter of public policy because the agreement contained a provision purporting to waive drivers’ rights under California’s Private Attorney General Act (“PAGA”) by barring any PAGA claim from all fora, and the provision was unenforceable and expressly non-severable from the entire arbitration agreement.49 The court further found that the delegation clause, outlining the specific claims that employees could bring to arbitration, was ambiguous, and that the provision allowing employees to opt-out of mandatory individual arbitration was too complicated. During the litigation, Uber modified its arbitration agreements with class action waivers to apply to employees not included in the current class action (2014 and 2015 agreements).50 The modifications simplified the procedure allowing drivers to opt out of mandatory individual arbitration, making it so drivers could not waive rights to bring certain lawsuits in state court as required by state law, and clearing up ambiguous language pertaining to its delegation clause. The judge suggested that it would likely be enforceable, but failed to rule on that issue as it pertained to the class action at hand.51

Read the full story at  Fisher Phillips | The Benefits of Mandatory Binding Arbitration Agreements With Class Action Waivers