Trial News

Uber drivers could be exempt from the Federal Arbitration Act (FAA) under §1, which provides that the statute does not apply to the contracts of transportation workers engaged in interstate commerce, the Third Circuit has ruled in a precedential decision. Finding that the residual clause of §1—which refers to “any other class of workers engaged in interstate or foreign commerce”—could apply to the ride-share drivers, the court remanded a putative class action to the lower court for discovery on whether the section does apply. Earlier this year, the contours of §1 were at issue in New Prime v. Oliveira (139 S. Ct. 532), which the Third Circuit referenced several times in its analysis of how broadly §1 may apply. (Singh v. Uber Tech., Inc., 2019 WL 4282185 (3d Cir. Sept. 11, 2019).)

Jaswinder Singh, a driver for Uber, filed a putative class action in New Jersey state court alleging that the ride-share company misclassifies its drivers as independent contractors, which deprives drivers of overtime pay and forces them to incur certain business expenses. Uber removed the case to federal court and then moved to compel arbitration. The plaintiff argued that Uber drivers fall within an exception in §1 of the FAA that exempts the contracts of transportation workers engaged in interstate commerce.

In granting Uber’s motion to compel, the district court did not rule on whether §1 covers the plaintiff and other Uber drivers. Instead, it concluded the provision applies to transportation workers who transport only goods, not workers who transport passengers. On appeal, the Third Circuit reversed. It held that based on its own and U.S. Supreme Court precedent, §1 may apply “to a class of transportation workers who transport passengers, so long as they are engaged in interstate commerce or in work so closely related thereto as to be in practical effect part of it.”

The Third Circuit focused on the residual clause of §1 to determine whether Uber drivers are exempt from the FAA’s reach. Given the Supreme Court’s decision in New Prime, the court noted it must resolve whether §1 applies before it can address whether a valid arbitration agreement exists that requires enforcement. This inquiry involves two parts: whether §1 applies to transporters of goods only and whether the plaintiff belongs to a class of workers engaged in interstate commerce.

The Third Circuit rejected the defendant’s attempts to cabin the statute’s text to transporters of goods only, concluding that §1 is not limited to workers who transport goods if they “are engaged in interstate commerce or in work so closely related thereto as to be in practical effect part of it.” The court explained that Uber provided no current statutes or other sources that restrict the enumerated workers in §1 (seamen and railroad employees) to only those who transport goods, which precluded extending this limitation to the class of workers in the residual clause. The Third Circuit noted that New Prime supports a broader interpretation of what workers are covered by §1 because that decision rejected the argument that §1 does not encompass independent contractors as “workers.”

However, the court did not reach the second part of its analysis regarding the plaintiff's engagement in interstate commerce, concluding that discovery is required to ascertain the facts surrounding that issue. It remanded for discovery to occur before deciding this question. The Third Ciruit also provided some guidance on what evidence could support the plaintiff belonging to a class of workers engaged in interstate commerce, including “the contents of the parties’ agreement(s), information regarding the industry in which the class of workers is engaged, information regarding the work performed by those workers, and various texts—i.e., other laws, dictionaries, and documents—that discuss the parties and the work.”

“With this ruling, Uber may no longer be able to have its employment disputes resolved on an individual basis subject to the rules Uber picked and decided in a private, closed-door arbitration,” said Cherry Hill, N.J., attorney Justin Swidler, who represents Singh. “Instead, the Third Circuit has held, in a precedential decision, that Uber drivers may get their day in court, in a public proceeding, before a jury of their peers. We are pleased with the decision, which may finally give Uber drivers their long-deserved day in court.”