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Arbitration Pacts Alive and Well, Even for Interstate Transportation Workers

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From JDSupraRichard Reibstein discusses cases in which workers engaged in interstate commerce were required to arbitrate based on state law. Richard writes:

Immediately following the issuance of the U.S. Supreme Court’s decision in New Prime v. Oliveira on January 15, 2019, we stated in a blog post that “even if an individual or group of workers is excluded [from arbitration] under the federal arbitration law, state arbitration laws may cover them and provide a statutory basis for compelling arbitration.” Soon thereafter, in a Law 360 article discussing a Washington State federal district court ruling that independent contractor drivers providing services to Amazon could not be compelled to arbitrate their IC misclassification claims, the reporter Linda Chiem quoted the publisher of this blog: “There’s a ‘hidden lesson’ from the Amazon decision. Companies can get around ‘arbitration-unfriendly laws’ by making sure it’s spelled out that their independent contractor agreements are governed by state laws that do not have the type of exclusions found in the Washington state arbitration law that tripped up the Amazon agreement.” As noted in the first two case developments from March 2021 as reported below, that is precisely what companies are beginning to do and the courts have agreed that state arbitration laws are all that is needed to compel arbitration.

Arbitration provisions in IC agreements are constantly being attacked by plaintiffs’ class action lawyers, who advance new and different arguments to try to avoid arbitration. It is therefore prudent to constantly review and update those agreements and the class action waivers therein, to maximize their enforceability, as we first noted in our November 14, 2018 blog post entitled “How to Effectively Draft Arbitration Clauses with Class Action Waivers in Independent Contractor Agreements.”  But an effective arbitration clause is not enough: businesses should also take steps to enhance their underlying independent contractor relationships to minimize misclassification exposure. Many companies have done so using a process such as IC Diagnostics™.

In the Courts (7 cases)

FAA EXEMPTION FROM ARBITRATION DOES NOT STYMIE ARBITRATION WHERE STATE LAW SUPPORTS IT.  A driver who contracted with ride-sharing company, Lyft, Inc., brought a putative class action lawsuit in a New York federal district court challenging Lyft’s practice of logging its drivers off of the Lyft app for performing too few rides. According to the complaint, plaintiff alleged that such practice violated the contract between Lyft and its drivers, which placed no limits on the drivers’ ability to access the app wherever and whenever they chose to do so. The contract also contained a clause requiring the drivers to arbitrate their disputes with Lyft on an individual basis. Lyft moved to compel arbitration under the FAA and New York state arbitration law. The court concluded that “rideshare drivers for companies like Lyft and Uber, as a nationwide class, perform sufficient numbers of interstate rides [even at 2-3% of overall rides], with sufficient regularity, to make them ‘engaged in’ interstate commerce” and, consequently, as interstate transportation workers, they are exempt from the FAA’s arbitration provisions.  But despite their coverage under the FAA exemption, the court held that plaintiff and the proposed class must arbitrate their claims because New York state arbitration law provides an alternate basis to compel arbitration, and the contract’s arbitration clause can be enforced under that law alone. Islam v. LyftInc., No. 1:20-cv-03004 (S.D.N.Y. Mar. 9, 2021).

DELIVERY WORKERS FOR AUTO PARTS COMPANY ARE COMPELLED TO ARBITRATE IC MISCLASSIFICATION CLAIMS PURSUANT TO PENNSYLVANIA LAW.  A federal district court has compelled arbitration of a proposed IC misclassification overtime claim by an automotive supply delivery driver, who is suing Parts Distribution Xpress, Inc. on behalf of herself and other drivers under the FLSA. The company engages drivers to deliver auto parts and supplies to its customers. The company moved to compel arbitration of the claims arguing that the broker and arbitration agreements signed by the driver constituted a valid, binding agreement covering the driver’s overtime claims. The court stated at the outset that “[a]lthough the Federal Arbitration Act authorizes, and in fact requires, courts to enforce most private arbitration contracts, employment contracts for ‘transportation workers’ are exempted from the FAA’s purview.” But the court concluded that, even assuming that the driver was a transportation worker exempted from the arbitration provisions of the FAA, the arbitration agreement was still enforceable under Pennsylvania state arbitration law. Adams v. Parts Distrib. Xpress Inc., No. 2:20-cv-00697 (E.D. Pa. Mar. 22, 2021).

HOUSE CLEANER MUST ARBITRATE IC MISCLASSIFICATION CLAIM AGAINST HANDY.  The U.S. Court of Appeals for the First Circuit has affirmed a district court’s order compelling arbitration of house cleaner’s wage and claims on behalf of herself and others against Handy Technologies, Inc., the operator of an online platform that enables users to retain the services of house cleaners and other providers of at-home services.  The house cleaner alleged that Handy violated the minimum wage and overtime provisions of the FLSA as well as requirements under Massachusetts state law due to Handy’s misclassification of the house cleaners as independent contractors and not employees. In ordering arbitration, the court noted that the plaintiff accessed and/or completed three electronic documents:  an online application form that required her to click a checkbox agreeing to Handy’s terms of use, including a mandatory arbitration clause; an app that listed several understandings, including one that advised the house cleaner that the independent contractor agreement had changed and that she needed to read the revised version before agreeing to new terms; and a screen asking her to accept the revised agreement which, if she scrolled through completely, contained an arbitration provision.  Handy made a motion to compel arbitration on the grounds that plaintiff entered into an online contract containing an arbitration clause, and the district court granted the motion. On appeal, the First Circuit affirmed, concluding that an online contract had been formed because the plaintiff, as the user of the online interface, had been given “reasonable notice of the terms” of the agreement and had made a “reasonable manifestation of assent to those terms.” The First Circuit further stated that while only a portion of the Agreement was automatically visible prior to plaintiff clicking “Accept,” and the arbitration language was only visible by scrolling, plaintiff was afforded reasonable notice of the terms and could not succeed in arguing otherwise “because she chose not to review it despite having an adequate opportunity to do so.” The First Circuit cited the Massachusetts Supreme Judicial Court, which has stated that “’clickwrap’ agreements – where a user is ‘required to expressly and affirmatively manifest assent to an online agreement by clicking or checking a box that states that the user agrees to the terms and conditions’ – are ‘regularly enforced’ and are the ‘clearest manifestations of assent.’” Emmanuel v. Handy Technologies, Inc., No. 20-01378 (1st Cir. Mar. 22, 2021).

Read the full story at Arbitration Pacts Alive and Well, Even for Interstate Transportation Workers: March 2021 ‎News Update | Locke Lord LLP – JDSupra

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