LEGAL ANALYSIS AND COMMENTARY FROM JUSTIA Are Rideshare Drivers Like er's and L's Subject to the Federal Arbitration Act? 20 MAY 2021 I SAMUEL ESTREICHER, REX HEINKE AND JESSICA WEISEL POSTED IN: COURTS AND PROCEDURE Since the emergence of the gig economy, courts have struggled to fit workers in such businesses into the traditional framework of employment law. One common issue is whether the Federal Arbitration Act (FAA) applies to drivers who work for rideshare companies Uber and L. If the FꜲ applies, predispute arbitration agreements covering federal and state statutory claims will be enforced; if the FAA does not apply, enforcement will be a matter of state law, and California and other states have made clear they will not enrce such pacts.
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LEGAL ANALYSIS AND COMMENTARY FROM JUSTIA
Are Rideshare Drivers Like Uber's and Lyft's Subject to the Federal
Arbitration Act?
20 MAY 2021 I SAMUEL ESTREICHER, REX HEINKE AND JESSICA WEISEL
POSTED IN: COURTS AND PROCEDURE
Since the emergence of the gig economy, courts have struggled to fit workers
in such businesses into the traditional framework of employment law. One
common issue is whether the Federal Arbitration Act (FAA) applies to drivers
who work for rideshare companies Uber and Lyft. If the FAA applies,
predispute arbitration agreements covering federal and state statutory claims
will be enforced; if the FAA does not apply, enforcement will be a matter of
state law, and California and other states have made clear they will not
enforce such pacts.
Section 1 of the FAA provides that the FAA does not apply to "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 Supreme Court
has interpreted this clause in two significant decisions. First, in Circuit City
Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Court held that the exception
only applies to transportation workers "engaged in foreign or interstate
commerce." Second, and more recently, the Supreme Court in New Prime
Inc. v. Oliveira, 139 S. Ct. 532 (2019), held that "contracts of employment"
included independent contractor agreements with interstate truckers.
Since New Prime, federal courts have decided several cases involving
rideshare drivers for Uber and Lyft that have considered the scope of § 1.
Their decisions have largely addressed two questions left open by New Prime
that are necessary to decide if rideshare drivers are "transportation" worker
"engaged in . . . interstate commerce" and, thus, not subject to the FAA.
The first question is whether the § 1 exception is limited to transportation
workers who transport goods, or if it extends to rideshare drivers who
transport people. This question stems from language in Circuit City that
"Congress' demonstrated concern with transportation workers and their
necessary role in the free flow of goods" justified extending the § 1 exception
to truckers. 532 U.S. at 121 (emphasis added). Relying on this language. Uber
and Lyft have argued their drivers are not covered by the exception because
they transport passengers, not goods.
The majority of courts have rejected this argument. The Third Circuit
examined the history of the FAA and the understanding of the terms
"seamen" and "railroad employees" at the time the FAA was enacted. The
court looked to two statutes passed contemporaneously with the FAA that the
Supreme Court cited in Circuit City to explain why Congress may have
excluded seaman and railroad employees in§ 1. Those statutes-the
Transportation Act of 1920 and the Railway Labor Act of 1926-regulated
railroad carriers that contained sleeping cars, which meant they transported
passengers. Because railroad employees at the time would have included
those who worked on passenger trains, the Third Circuit reasoned that"§ 1 is
not limited to transportation workers who transport goods, but may also
apply to those who transport passengers . ... " Singh v. Uber Techs. Inc., 939
F.3d 210, 223 ( 3d Cir. 2019). Further, the court noted that Circuit City's use
of "goods" was "convenient shorthand to discuss interstate commerce." Other
courts have agreed. See, e.g., In re Grice, 974 F. 3d 950 (9th Cir. 2020);
Cunningham v. Lyft, Inc., 450 F.Supp.3d 37, 44-45 (D. Mass. 2020 ).
Despite Singh's reasoning, the authority on the goods/passengers issue is not
uniform. In Tyler v. Uber Technologies, Inc. , a district court relied on pre
Circuit City law in the D.C. Circuit, and, constrained by that law, held§ 1"
'only excludes from the provisions of the Act the employment contracts of
workers engaged in the transportation of goods in commerce.' " (quoting Cole
v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1471 (D.C. Cir. 1997)). In Osvatics v.
Lyft, Inc., a different district court in the District of Columbia reached the
opposite conclusion. This creates an intra-circuit split that the D.C. Circuit
may need to resolve. If that court agrees with Tyler, or another circuit holds§
1 only applies to workers who transport goods, the Supreme Court would
need to resolve a circuit split.
The second significant question left undecided by New Prime is what
constitutes "engaged in . . . interstate commerce" and whether it applies to
rideshare drivers. To qualify for the FAA exception, must a driver transport
passengers across state lines? Must that be a regular activity? Or is it
sufficient that they transport passengers from other states or countries-as
drivers taking passengers to and from airports commonly do? On this issue,
the courts are more divided.
As a general rule, courts do not decide the scope of the § 1 exception based on
the tasks performed by the individual plaintiff, but on "whether the class of
workers to which the complaining worker belonged engaged in interstate
commerce." See, e.g., Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 800
(?th Cir. 2020). This largely depends on the role drivers play in relation to
the employer's business and does not depend on the workers actually
crossing state lines. For instance, the Ninth Circuit has held that drivers who
complete "last mile" deliveries for Amazon products that routinely originate
from another state "form a part of the channels of interstate commerce" even
though they rarely crossed state lines. Rittmann v. Amazon.com, Inc., 971