Seyfarth Synopsis: The Ninth Circuit, following the Supreme Court's 2018 decision in Epic Systems Corp. v. Lewis, has upheld the validity of class-action waivers in Uber's arbitration agreement, and has held that a named plaintiff cannot opt out of the agreement on behalf of class members. The Ninth Circuit applied these holdings to reverse certification of a class of 160,000 Uber drivers. O'Connor v. Uber Technologies, Inc.
In various class actions, all before U.S. District Court Judge Edward Chen, Uber drivers sued for unpaid expenses and tips, claiming that they were entitled to these items as employees, and that Uber had misclassified them as independent contractors. Judge Chen enjoined Uber from enforcing its arbitration agreement, and required Uber to revise the agreement to provide enhanced notice and an extended opt-out period of 30 days.
After Judge Chen certified a class, Uber issued a new arbitration agreement to all drivers. Class counsel moved to enjoin Uber from enforcing the agreement and from further communicating with class members. Judge Chen granted the motion.
During the pendency of the action, the Ninth Circuit in one of the Uber class actions—Mohamed v. Uber Technologies, Inc.—reversed Judge Chen's denial of Uber's motion to compel arbitration. In that 2016 decision, the Ninth Circuit held that the arbitration agreement was not unconscionable, and that the agreement's opt-out provision was not illusory. In response to Mohamed, Judge Chen permitted Uber to issue a new arbitration agreement, but refused to vacate his order retroactively.
The Appellate Court Decision
On an appeal that consolidated various Uber class actions, the drivers argued that the arbitration agreements were unenforceable on two grounds not decided in Mohamed. The Ninth Circuit rejected the drivers' arguments on both grounds. First, the drivers argued that named plaintiffs had opted out of the arbitration agreement on behalf of the entire class. The Ninth Circuit rejected this argument because nothing authorized the named plaintiffs to do so, and because the drivers relied exclusively on state law that did not consider the preemptive effect of the Federal Arbitration Act. Second, the drivers argued that the class-action waiver in the arbitration agreement was unenforceable because it violated the National Labor Relations Act. The Ninth Circuit held that this argument was expressly rejected by the Supreme Court's recent decision in Epic Systems Corp. v. Lewis.
The Ninth Circuit thus reversed Judge Chen's orders denying the motion to compel arbitration. Because the certified class included drivers who had agreed to arbitrate, and because the arbitration agreement called for the arbitrator to decide the question of arbitrability, the Ninth Circuit reversed the class certification and remanded for Judge Chen to consider class certification on some other basis.
What O'Connor Means For Employers
O'Connor reiterates the importance of the U.S. Supreme Court's Epic decision for employers and the courts' willingness to enforce properly crafted arbitration agreements. After Epic, employers drafting arbitration agreements should consider anew the use of class-action waiver provisions. O'Connor illustrates how the existence of enforceable arbitration agreements can dismantle class claims.
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