Uber to Arbitrate Misclassification Claims in Illinois

On October 29, 2020, a class action lawsuit was filed in the United States District Court for the Northern District of Illinois accusing popular ride sharing platform Uber Technologies, Inc. (“Uber” or “Defendant”), of misclassifying its drivers as independent contractors instead of employees under federal wage laws. The action alleges that because drivers were misclassified as independent contractors, they missed out on benefits and protections granted to employees such as minimum wage and overtime pay. However, the litigation was stayed on February 23, 2022, when U.S. District Judge Martha Pacold granted Uber’s motion to compel arbitration.

Drivers for Uber are required to consent to agreements containing arbitration provisions governed by the Federal Arbitration Act (“FAA”). According to the FAA, “agreements to arbitrate [are] ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’” However, Section 1 of the FAA excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from such agreements.

While the authority to decide who falls under this exclusion lies with the District Courts, courts are split on whether gig economy drivers fall within the scope of the exemption.

In its February 22, 2021 motion to compel arbitration, Uber cited arbitration rulings in Capriole v. Uber Techs, Inc. in the Ninth Circuit and Davarci v. Uber Techs, Inc. in the United States District Court for the Southern District of New York. Both cases held that app-based rideshare and food-delivery drivers are not transportation workers engaged in interstate commerce for purposes of the FAA exclusion because Uber drivers do not participate in “a continuous chain of cross-border transportation controlled or even coordinated by Uber.”

Plaintiffs argued in opposition that the drivers occasionally “provid[e] rides to and from airports and other travel hubs which places them within the ‘flow of interstate commerce’” and therefore exempts them from FAA arbitration requirements. They cited Waithaka v. Amazon.com, Inc. from the First Circuitand Rittmann v. Amazon.com, Inc. from the Ninth Circuit, two cases where AmazonFlex “last mile” drivers were found to move through interstate commerce and thus fell within the scope of the transportation exemption. Plaintiffs claimed that Uber drivers should be treated similarly to these AmazonFlex “last mile” drivers.

 However, Judge Pacold looked to Seventh Circuit precedent in Wallace v. Grubhub Holdings, Inc. clarifying that people whose occupation is not defined by engagement in interstate commerce do not qualify for the exemption just because they occasionally perform that kind of work. Accordingly, Judge Pacold found that the Uber drivers do not meet the transportation worker in interstate commerce exclusion under the FAA. Therefore, all drivers claiming to have been misclassified as independent contractors under Illinois law must proceed through individual arbitration.

Pursuant to her order compelling arbitration, Judge Pacold struck the proposed class claims and stayed the case pending the conclusion of individual arbitration. The parties are directed to file a joint status report every six months addressing the state of the dispute, including the progress of arbitration and any settlement. The first status report is due by August 23, 2022.

Updates will be posted to this blog as the matter progresses. The case caption for the lawsuit is Leaks v. Uber Technologies Inc., No. 1:20-cv-06423, filed in the United States District Court for the Northern District of Illinois.

The legal team at Miller Shah LLP has significant experience representing employment matters. If you have any questions regarding this subject or this post, please contact John Roberts (jcroberts@millershah.com) or Casey Yamasaki (ctyamasaki@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

Miller Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. The firm is an active member of Integrated Advisory Group (www.iaginternational.org), which provides clients access to excellent legal and accounting resources around the globe. For more information about the firm, please visit https://www.millershah.com/.

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