Capriole v. Uber Technologies, Inc.: Uber Drivers Must Arbitrate Misclassification Claims

RSS Feed

Who decides whether a putative class of gig-economy workers like drivers for Uber Technologies, Inc. (“Uber”) are misclassified as independent contractors rather than employees? In Capriole v. Uber Technologies, Inc., No. 20-16030 (9th Cir. Aug. 2, 2021) (slip op. available here), the Ninth Circuit examined an exemption under the Federal Arbitration Act (“FAA”) for transportation workers and whether a court or an arbitrator would decide such a dispute for Uber drivers whose contracts with Uber contain mandatory arbitration provisions. While the plaintiffs are drivers, the Ninth Circuit held that they do not fall within the “interstate commerce” exemption to mandatory arbitration under the FAA and affirmed an order compelling arbitration. Slip op. at 7.

This case originated in Massachusetts. Uber classifies all of its Massachusetts drivers as independent contractors, not employees. Slip op. at 7. This means they are required to pay business expenses, such as the cost of maintaining their vehicles and gas, and have no guaranteed minimum wage or overtime premiums. When the plaintiffs signed up to become Uber drivers, they had agreed to its technology services agreement, which contained a mandatory arbitration agreement governed by the FAA that had a class action waiver provision. Id. at 8. They brought a putative class action in federal district court in Massachusetts and simultaneously requested a preliminary injunction prohibiting Uber from classifying its drivers in Massachusetts as independent contractors. Id. at 9.

Uber moved to compel arbitration and transfer the case to the District Court for the Northern District of California pursuant to a forum selection clause in Uber’s driver agreements. Slip op. at 11-12. The Massachusetts district court granted the motion to transfer. Meanwhile, the plaintiffs amended their complaint to add new claims, additional named plaintiffs, and the allegation that “Capriole has driven passengers across state lines while driving for Uber.” Id. at 12. The plaintiffs appealed after the district court granted Uber’s motion to compel arbitration and denied their request for a preliminary injunction. Id.

The plaintiffs argued they were exempt from mandatory arbitration under Section 1 of the FAA because they were “a ‘class of workers engaged in foreign or interstate commerce.’” Slip op. at 13. Under Section 1 of the FAA, there is an exemption for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. The Ninth Circuit noted the Supreme Court’s instruction that the last category, described as the “residual clause,” should be afforded a “narrow construction.” Slip op. at 14. The Ninth Circuit disagreed with the plaintiffs’ contentions, joining what it deemed a “growing majority of courts holding that Uber drivers as a class of workers do not fall within the ‘interstate commerce’ exemption from the FAA.” Id. at 13. When determining whether the exemption applies, “the analysis focuses on the inherent nature of the work performed and whether the nature of the work primarily implicates inter- or intrastate commerce.” Id. at 15. The Ninth Circuit assessed the relevant “class of workers,” Uber drivers, at the nationwide level rather than confining it to a limited geographic region. Id. The Ninth Circuit concluded that even though some Uber drivers “undoubtedly cross state lines in the course of their work” and rideshare companies contract with airports to permit Uber drivers to pick up arriving passengers, Uber drivers as a class are not engaged in interstate commerce because their work predominantly entails intrastate trips. Id. at 19.

Based on Capriole, the Ninth Circuit remains unpersuaded by occasional interstate trips or trips to transportation hubs, and instead focuses on whether the trips form part of a single, unbroken stream of interstate commerce that renders interstate travel a central part of a rideshare driver’s job description. Slip op. at 23. A narrow construction of the Section 1 exemption for transportation workers sets the bar high for any similar gig economy workers to fit into the FAA’s residual clause to avoid arbitration. But it is not impossible, as the Ninth Circuit recently joined the First Circuit in holding that Amazon Flex workers did fall under the interstate commerce exemption due to the interstate nature of Amazon’s business in its decision in Rittman v., Inc., 971 F.3d 904 (9th Cir. 2020). Id. at 24. This may give some comfort to other gig economy workers outside the realm of Uber drivers.  

Authored by:
Liana Carter, Senior Counsel