Uber Loses Bid to Force Arbitration on California Driver

  • California judge sides with driver in labor commissioner case
  • Uber's arbitration clause found unconscionable, unenforceable

A former Uber Technologies Inc. driver defeated the company’s bid to force her into arbitration, a second victory after California’s labor commissioner said she should have been considered an employee.

A San Francisco state judge sided with the driver Monday, finding the app-based ride service’s arbitration clause is unenforceable. The decision echoed a federal judge’s ruling preserving a class action lawsuit on behalf of thousands of Uber drivers.

Uber is appealing the San Francisco federal court decision in a case that might force the startup to change its business model and erode its $50 billion valuation.

While Monday’s ruling isn’t binding on other state judges, it will guide them in similar cases against Uber, said James Evans, a lawyer who drafts arbitration agreements for companies and helps enforce them.

"It’s persuasive authority that other drivers will be able to rely on in urging other courts to find that Uber’s arbitration agreement should not be enforced," Evans said in a phone interview.

San Francisco Superior Court Judge Ernest Goldsmith said Uber’s contract with drivers is “flatly inconsistent” because it says in one provision that a private arbitrator decides whether a dispute should be resolved in arbitration, and says in another that the choice is to made by a judge.

‘Stark Inconsistency’

"I’m not going to fly in the face of a stark inconsistency in order to massage this into arbitrability," the judge told lawyers during a hearing Monday. Goldsmith issued a tentative ruling before the hearing, then made it final in court.

"I can’t imagine that they’re going to continue with a contract like this," Goldsmith said, referring to Uber. "It’s not a close case. It starts with the clearest contradictory language and just goes on and on and on."

Uber will will ask a state appeals court to review the ruling, Jessica Santillo, a spokeswoman for Uber, said in an e-mail.

“The Uber partner in this case agreed to resolve disputes of this nature through arbitration when she joined the platform last year,” Santillo said.  “The right to arbitrate disputes has been confirmed multiple times by the Supreme Court.”

An appeal will take 18 months to two years, and "the passage of time is helpful to Uber," Evans said. U.S. Supreme Court decisions that generally support the enforcement of arbitration agreements are at odds with some California decisions that have produced a "mixed bag" of results, Evans said.

July 2014

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Uber said Barbara Berwick agreed to the arbitration agreement before using the company app starting in July 2014.

When she later complained to the labor commissioner’s office that she was entitled to be treated as an employee, San Francisco-based Uber argued that she was an independent contractor and not entitled to recover claimed wages or expense reimbursement. A hearing officer in the commissioner’s office disagreed.

The commissioner said the company dictates standards such as how old a driver’s car can be and who is qualified to offer services through the Uber platform.

Uber appealed the commissioner’s finding in state court in June. Uber then argued Berwick’s dispute belongs in arbitration.

Federal judges in San Francisco have refused to throw out driver employment status lawsuits against Uber and its rival Lyft Inc., saying the matter is best left to a jury to decide.

The case is Uber Technologies Inc. v. Berwick, 15-546378, Superior Court of California, County of San Francisco. The federal cases is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).

A former Uber Technologies Inc. driver defeated the company’s bid to force her into arbitration, a second victory after California’s labor commissioner said she should have been considered an employee.

A San Francisco state judge sided with the driver Monday, finding the app-based ride service’s arbitration clause is unenforceable. The decision echoed a federal judge’s ruling preserving a class action lawsuit on behalf of thousands of Uber drivers.

Uber is appealing the San Francisco federal court decision in a case that could force the startup to change its business model and erode its $50 billion valuation.

While Monday’s ruling isn’t binding on other state judges, it will guide them in similar cases against Uber, said James Evans, a lawyer who drafts arbitration agreements for companies and helps enforce them.

"It’s persuasive authority that other drivers will be able to rely on in urging other courts to find that Uber’s arbitration agreement should not be enforced," Evans said in a phone interview.

San Francisco Superior Court Judge Ernest Goldsmith said Uber’s contract with drivers is “flatly inconsistent” because it says in one provision that a private arbitrator decides whether a dispute should be resolved in arbitration, and says in another that the choice is to made by a judge.

‘Stark Inconsistency’

"I’m not going to fly in the face of a stark inconsistency in order to massage this into arbitrability," the judge told lawyers during a hearing Monday. Goldsmith issued a tentative ruling before the hearing, then made it final in court.

"I can’t imagine that they’re going to continue with a contract like this," Goldsmith said, referring to Uber. "It’s not a close case. It starts with the clearest contradictory language and just goes on and on and on."

Uber will will ask a state appeals court to review the ruling, Jessica Santillo, a spokeswoman for Uber, said in an e-mail.

“The Uber partner in this case agreed to resolve disputes of this nature through arbitration when she joined the platform last year,” Santillo said.  “The right to arbitrate disputes has been confirmed multiple times by the Supreme Court.”

An appeal will take 18 months to two years, and "the passage of time is helpful to Uber," Evans said. U.S. Supreme Court decisions that generally support the enforcement of arbitration agreements are at odds with some California decisions that have produced a "mixed bag" of results, Evans said.

July 2014

Uber said Barbara Berwick agreed to the arbitration agreement before using the company app starting in July 2014.

When she later complained to the labor commissioner’s office that she was entitled to be treated as an employee, San Francisco-based Uber argued that she was an independent contractor and not entitled to recover claimed wages or expense reimbursement. A hearing officer in the commissioner’s office disagreed.

The commissioner said the company dictates standards such as how old a driver’s car can be and who is qualified to offer services through the Uber platform.

Uber appealed the commissioner’s finding in state court in June. Uber then argued Berwick’s dispute belongs in arbitration.

Federal judges in San Francisco have refused to throw out driver employment status lawsuits against Uber and its rival Lyft Inc., saying the matter is best left to a jury to decide.

The case is Uber Technologies Inc. v. Berwick, 15-546378, Superior Court of California, County of San Francisco. The federal cases is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).

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