Be Careful What You Wish For
Not long after we hit the “publish” button on our article The Myths Of Arbitration, we discovered that two federal judges had thoughtfully provided even more evidence that businesses should not reflexively insert arbitration clauses in their standard-form agreements. Thousands of years ago, Aesop warned: “be careful what you wish for; you may get it.” Tech darlings Postmates and Doordash didn’t listen to Aesop, but we suspect they are paying attention now.
Postmates and Doordash are technology companies that offer apps allowing customers to order restaurant food for home delivery. The food is delivered by “couriers,” drivers unsurprisingly deemed to be independent contractors rather than employees by both Postmates and Doordash. Likewise, both Postmates and Doordash include in their “independent contractor” agreements arbitration clauses that obligate “couriers” to arbitrate all disputes arising under the agreements, including disputes over their status as independent contractors. Making sure they dotted all I’s and crossed all T’s, lawyers for both companies also required the couriers to waive the right to bring or be part of a class action in court or in arbitration. Nailed it all down!
“Nailed it all down! Including their own private parts, as it turned out.”
Including their own private parts, as it turned out. Postmates got hit with 5,274 individual arbitration demands claiming that its couriers were actually employees. Doordash received 5,879 demands for arbitration of the same issue. Facing filing fees alone of more than $10 million each (with fees for arbitrators at least five or six times that), both companies refused to participate in arbitration, offering flimsy excuses, and the couriers turned the tables, suing in federal court to compel the big companies to honor their promises to arbitrate.
If you have followed the United States Supreme Court’s decisions under the Federal Arbitration Act, you know what happens next: both judges granted the couriers’ motions to compel. We love a great judicial turn of phrase, especially when we agree with it, so we’ll close with some words from the conclusion of Judge William H. Alsup’s opinion in Abernathy v. Doordash, Inc.:
For decades, the employer-side bar and their employer clients have forced arbitration clauses upon workers, thus taking away their right to go to court, and forced class-action waivers upon them too, thus taking away their ability to join collectively to vindicate common rights. The employer-side bar has succeeded in the United States Supreme Court to sustain such provisions. The irony, in this case, is that the workers wish to enforce the very provisions forced on them by seeking, even if by the thousands, individual arbitrations, the remnant of procedural rights left to them. The employer here, DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause. No doubt, DoorDash never expected that so many would actually seek arbitration. Instead, in irony upon irony, DoorDash now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed, at least by this order.