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Do displaced Uber drivers have a WARN Act claim? Arbitrator, then court, will decide

By Lisa Milam, J.D.

When Uber pulled out of Austin, Texas, it sidelined 10,000 drivers without advance notice, a proposed class action WARN suit alleges—another front in the ongoing legal battle over the employment status of rideshare drivers.

Uber Technologies violated the Worker Adjustment and Retraining Notification Act (WARN) when it ceased operations in Austin, Texas, without giving its 10,000 Uber drivers in the city at least 60 days’ advance notice, according to a former driver bringing a putative class action suit against the company. Whether the driver is an employee or an independent contractor is for an arbitrator to decide, pursuant to the parties’ arbitration agreement. If the arbitrator determines the drivers are employees, and thus covered under the WARN Act, the next step will be to decide whether he can pursue the claim on a class basis. That question will turn on whether the class waiver contained in the arbitration agreement is enforceable as to claims under the WARN Act—a matter for a federal court in California to determine, if need be (Johnston v. Uber Technologies, Inc., September 16, 2019, Chen, E.).

Uber rolls out of Austin. After Uber lost a public referendum hoping to overturn a city ordinance requiring rideshare companies to beef up their background check procedures, the rideshare company immediately terminated its operations in Austin, Texas. According to the plaintiff’s complaint, the company left 10,000 drivers in the cold when it did so. (The plaintiff alleges that driving for Uber was his sole livelihood for more than a year.).

He filed a putative class action under the WARN Act. The suit hinges on the drivers’ status as “affected employees” of Uber, thus entitled to 60 days notice before a plant closing or mass layoff—rather than independent contractors, who are not protected by the statute.

Motion to compel arbitration. Before the court was Uber’s second motion to compel arbitration. Uber’s first request came while the validity of its arbitration agreement was awaiting resolution by the Ninth Circuit in the landmark O’Connor v. Uber Technologies wage suit (litigation also overseen by Judge Chen, who also presides here). The court denied the motion without prejudice because it was uncertain how long the O’Connor appeal would be pending. In September 2018, the Ninth Circuit reversed this court’s order denying Uber’s motion to compel. The parties conferred as to the impact of the appellate court’s decision on the case at hand, but could not reach an accord, leading Uber to file this renewed motion to compel.

Driver “clicked” consent. When the plaintiff signed onto the Uber app “to generate leads for potential riders” (as Uber describes it), he had to click “YES, I AGREE,” twice, to confirm his acceptance of Uber’s arbitration agreement, in order to proceed with sign-up. He was later emailed a revised arbitration agreement, and again he clicked his assent in the Uber app to the detailed arbitration provision. He declined the company’s offer to opt out of the agreement via email (although thousands of other drivers did so, according to Uber).

First, employee status. The key issue was whether the court should compel individual arbitration or whether the class waiver in the arbitration agreement is unenforceable under the WARN Act. But first, the drivers’ status as employees or independent contractors had to go to arbitration. Employee status is a threshold question—the driver’s standing to bring the claim was predicated on a finding that the drivers are statutory employees. It was undisputed the status question was placed in the hands of the arbitrator under the arbitration agreement’s delegation clause. Therefore, arbitration was the first step.

Then, enforceability of class waiver. If the arbitrator makes a threshold finding that the drivers are employees with standing to sue, then the case is sent back to the district court for consideration of whether the class waiver is valid here, or whether the WARN Act supersedes the FAA’s mandate to enforce arbitration agreement as written. That’s because Uber’s agreement provides that the validity of class waivers is to be resolved by “a civil court of competent jurisdiction.” Again, though, the court cannot rule on the legal question of the relationship between the WARN Act and the FAA unless and until it is established that the plaintiff driver falls within the WARN Act’s protection.

(Or not.) If, however, the arbitrator determines that the driver has been correctly classified as an independent contractor, the WARN Act would be no impediment to arbitration, and the dispute would stay in the arbitral forum.