Third Circuit holds Uber drivers are not exempt from Federal Arbitration Act and are subject to binding arbitration.

The Third Circuit joined the First and Ninth Circuits in holding that Uber drivers are not exempt from the Federal Arbitration Act (FAA) and, therefore, are subject to binding arbitration. 

The plaintiffs in the underlying action were current and former Uber drivers who brought putative class actions against their employer alleging that Uber had violated state wage and hour laws and the Fair Labor Standards Act (FLSA) by misclassifying them as independent contractors, thereby depriving them of overtime pay and other benefits. Uber moved to compel arbitration pursuant to the terms of its “Technology Services Agreement,” which required drivers to “resolve disputes with [Uber] on an individual basis through final and binding arbitration unless [the driver] chose to opt out.” 

The plaintiffs argued that they were exempt from the FAA’s coverage by virtue of an exemption in § 1 for “seamen, railroad employees, or any other class of workers engaged in . . . interstate commerce.” The district court disagreed and granted Uber’s motion, holding that § 1 applied only to transportation workers who move goods, not those who carry passengers. 

The plaintiffs appealed, and the Third Circuit reversed, holding that the exception “applied equally to transportation workers who transport passengers so long as they are engaged in interstate commerce.” The court then remanded to the district court to determine whether the plaintiffs belonged to a class of workers “engaged in interstate commerce.” After a period of limited discovery, the district court found that they did not. 

Once again, the plaintiffs appealed, but this time the Third Circuit affirmed the district court, holding that the plaintiffs did not fall within the exception because interstate movement of goods or passengers was not a central part of the job description of the class. The court found particularly instructive the fact that, nationwide, interstate rides “constituted just 2% of all rides, resembled in character the other 98% of rides, and likely occur due to the happenstance of geography.”
 

_{Case Law Alerts, 3rd Quarter, July 2023 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2023 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}