Karon Law Blog

Employers Requiring Forced Arbitration Bitten by Own Agreements

[Editor’s Note: As explained by Law Clerk Abbie Rosen, there seems to be some cosmic justice in Chipotle and Uber trying to evade the consequences of the arbitration agreements they required their workers to sign (I realize there is an on-going dispute as to whether Uber drivers are technically “employees”.)  In any event, as the old saying goes, “be careful what you wish for”.   Jon Karon]

By Abbie Rosen

This blog has discussed forced arbitration agreements a couple of times in the past, warning about the issues that arise from their use. In fact, we discussed arbitration agreements between employers and employees in our post about 5-4 decisions a few months ago. It would seem, skimming the headlines this past month that Epic Systems v. Lewis (decided this May of this year, stating that employers were free to make their employees sign arbitration agreements), is turning into a really impressive case of Karma for at least a couple of companies.

You may remember that Uber was a champion of the Arbitration Agreement, requiring it for its users as well as its employees. Well, according to a Reuters, as Uber Drivers are being held to their arbitration agreements and not eligible to form a class action lawsuit, about 12,500 of them have filed separate arbitration claims. If you’re thinking that’s a lot, it is. It’s also a lot of money to be spent by Uber on arbitration costs. According to the article, dated December 6, 2018, Uber had only paid for the arbitrator’s retaining fee in 6 of these claims. Which makes sense, based on Reuter’s estimates, the retaining fees alone for all 12,500 claims would run them somewhere around 18.7 million dollars. And this is only one of many costs they would have to pay in order to arbitrate. Not surprisingly, more recent articles from techcrunch.com and engadget.com are reporting that a settlement is in the works between the drivers and the company.

Another company that has been requiring arbitration agreements for employment was Chipotle, and it doesn’t seem to be shaking out exactly as they planned either. According to the Huffington Post, when the decision was made to enforce worker/employer arbitration agreements, Chipotle was facing a potential class action that involved roughly 10,000 employees or former employees. As of December 20, 2018 (the date of Huffington Post’s Article), 150 of those 10,000 have filed individual arbitration claims. The article also says that the lawyers estimate arbitration costs between 30,000 and 50,000 per claim. Already that’s about 6 million, and if every person involved in the failed class action joins in it’s about 400 million dollars just in costs.  So now, having asked the Court to dismiss the class action based on its arbitration agreements, Chipotle recently asked the same Court to preclude former class members from being represented in arbitration by the same attorney who filed the class action.  When the Court denied that request, Chipotle appealed arguing that the arbitrations were “causing immediate harm to Chipotle.” The judge again ruled against Chipotle, finding its conduct “unseemly.”

Ironically, both of these companies’ troubles are stemming from alleged improper wage practices over the course of years. The question that obviously arises is whether the money they saved from those practices will even cover their arbitration fees. It will be interesting to see how well they honor their own arbitration agreements as they attempt to sort this all out.

Sources:

https://www.reuters.com/article/legal-us-otc-uber/forced-into-arbitration-12500-drivers-claim-uber-wont-pay-fees-to-launch-cases-idUSKBN1O52C6

https://techcrunch.com/2018/12/22/uber-drivers-settlement/

https://www.engadget.com/2018/12/23/uber-offers-settlement-to-drivers-in-arbitration/

https://www.huffingtonpost.com/entry/chipotle-mandatory-arbitration-agreements_us_5c1bda0de4b0407e90787abd