On February 10, 2020, a U.S. District Court judge ordered an employer to individually arbitrate 5,010 claims of worker misclassification. For context, DoorDash provides a service where customers order food online, and couriers pick up the food and deliver it to the customers. DoorDash classifies its couriers as independent contractors and includes a mandatory arbitration agreement in its courier contracts. These arbitration agreements include waivers by the couriers of their right to file class actions.
When over 5,000 couriers filed for arbitration, DoorDash asked a District Court to stay the claims until a state court approved a related class settlement. The judge issued a stinging rebuke to DoorDash, accusing it of giving “the runaround” to the couriers. The court instead ordered DoorDash to individually arbitrate all 5,010 arbitration claims.
This case is reminiscent of similar circumstances recently faced by Uber, a ridesharing company. Uber also used mandatory arbitrations agreements for its drivers which included class-action waivers. Unfortunately for Uber, the drivers called its bluff, and more than 60,000 of them filed individual arbitration demands. Because Uber would have to pay most of the arbitration costs, it would cost over $600 million dollars to arbitrate every claim.
These cases provide cautionary tales to employers. There are clear benefits for employers to arbitrate employment disputes. However, employers must also pay most of the cost of arbitration, and arbitrators are not cheap. When arbitration claims number in the thousands, these costs become staggering.
COUNSEL TO MANAGEMENT:
Arbitration agreements can be an effective method of keeping litigation costs down and limiting class actions. However, they are not always beneficial to employers in every case. If you have any questions about employment arbitration agreements, contact the employment law experts at The Saqui Law Group, a Division of Dowling Aaron Incorporated.