Are Rideshare Drivers Like Uber’s and Lyft’s Topic to the Federal Arbitration Act? | Samuel Estreicher | Verdict

Since the advent of the gig economy, the courts have struggled to bring workers in such companies into the traditional framework of labor law. A common question is whether the Federal Arbitration Act (FAA) applies to drivers who work on ridesharing Uber and Lyft. When the FAA applies, pre-trial arbitration agreements are enforced that cover federal and state legal claims. When the FAA does not apply, enforcement is a matter of state law, and California and other states have made it clear that they will not enforce such covenants.

Section 1 of the FAA provides that the FAA does not apply to “employment contracts of seafarers, railroad workers, or any other class of worker engaged in foreign or international trade.” 9 USC § 1. The Supreme Court interpreted this clause in two main decisions. First, in Circuit City Stores, Inc. v. Adams, 532 US 105 (2001), the Court ruled that the exemption only applies to transport workers “engaged in foreign or international trade”. Second, and more recently, the Supreme Court in New Prime Inc. v Oliveira, 139 S. Ct. 532 (2019) found that “employment contracts” included independent contractual arrangements with interstate truckers.

Since New Prime, federal courts have ruled several ridesharing cases for Uber and Lyft that have considered the scope of Section 1. Your decisions have largely addressed two open questions New Prime must have in order to determine whether ridesharing riders are “transportation”. Worker “employed in.. . interstate trade ”and thus not subject to the FAA.

The first question is whether the exception under Section 1 is limited to transport workers who transport goods or whether it extends to carpooling who transport people. This question arises from the language in Circuit City that “Congress has shown concern about transport workers and their necessary role in the free flow of goods,” which justified the extension of the § 1 exception to truckers. 532 US at 121 (emphasis added). Rely on this language. Uber and Lyft have argued that their drivers are not affected by the exemption because they are carrying passengers, not goods.

The majority of the courts rejected this argument. The Third Circle examined the FAA’s history and understanding of the terms “seafarers” and “railroad workers” at the time the FAA entered into force. The court was considering two bills passed concurrently with the FAA that the Circuit City Supreme Court cited to explain why Congress may have excluded seafarers and railroad workers in Section 1. These laws – the Transportation Act of 1920 and the Railway Labor Act of 1926 – regulated railroad companies that included sleeping cars, which meant they carried passengers. Since the railroad workers at that time would have included those who worked on passenger trains, the Third Circuit argued that “Section 1 is not limited to transport workers who transport goods, but can also apply to those who transport passengers. . . . ”Singh v. About tech. Inc., 939 F.3d 210, 223 (3d Cir. 2019). The court also found that Circuit City’s use of “goods” was “a convenient abbreviation for discussing international trade”. Other courts have agreed. See e.g. B. In re Grice, 974 F.3d 950 (9th Cir. 2020); Cunningham v Lyft, Inc., 450 F. Supp. 3d 37, 44-45 (D. Mass. 2020).

Despite Singh’s argument, authority on the goods / passengers issue is not uniform. In the Tyler v Uber Technologies, Inc. case, a district court in the DC Circuit relied on the city law of Circuit City and under that Act Section 1 “” only held workers’ employment contracts under the provisions of the Act in the transportation of goods in commerce active. “” (Cited Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465, 1471 (DC Cir. 1997)). In the Osvatics v Lyft, Inc. case, another District Court in the District of Columbia came to the opposite conclusion. This creates a split within the circuit that the DC circuit may need to resolve. If that court approves Tyler or a different circuit applies, Section 1 only applies to workers transporting goods, the Supreme Court would have to resolve a circuit breakdown.

The second important question that leaves New Prime undecided is what “engaged in” means. . . interstate trade ”and whether this applies to ridesharing. Does a driver need to transport passengers across state lines to qualify for the FAA exemption? Does this have to be a regular activity? Or is it enough that they carry passengers from other states or countries – as drivers usually do, who bring passengers to and from airports? The courts are more divided on this issue.

As a rule, the courts do not decide on the scope of the exception under Section 1 on the basis of the tasks performed by the individual plaintiff, but on the basis “whether the class of employees to which the complaining employee belonged is active in international trade” . See e.g. B. Wallace v Grubhub Holdings, Inc., 970 F.3d 798, 800 (7th Cir. 2020). This depends largely on the role drivers play in relation to the employer’s business, and not on the fact that workers actually cross state lines. For example, the Ninth Circuit found that drivers who “last mile” shipments for Amazon products routinely sourced from another state are “part of the channels of international trade,” even though they rarely cross state lines to have. Rittmann v. Amazon.com, Inc., 971 F.3d 904, 917 (9. Cir. 2020), cert. denied, 141 S. Ct. 1374 (2021). Conversely, the Wallace Court found that drivers who deliver groceries from local restaurants are not doing international trade.

In applying this test to Uber and Lyft, numerous courts have ruled that ridesharing drivers do not engage in international trade. In re Grice argued that ridesharing drivers are very similar to taxi companies, serving only a local area, and therefore “have an” only fortuitous and fortuitous “relationship with interstate transit”. In other cases, it is recognized that drivers can regularly transport interstate travelers, particularly to and from airports, but nonetheless find that driver class “does not play an integral role in a chain of interstate transport”. Capriole v Uber Techs., Inc., 460 F. Supp. 3d 919, 932 (ND Cal. 2020) (citing statistics that only 2.5% of Uber trips crossed state borders and only 10% of all trips started or ended at airports); Hinson v Lyft, Inc., 2021 WL 838411, at * 7 (ND Ga. Feb. 206, 2021) (while Lyft drivers may interfere with interstate trade, they are “not entirely in the special business of offering interstate transportation” the passengers ‘”).

Other courts have come to the opposite conclusion. For example, in the Haider v Lyft, Inc. case, the court focused on the specifics of Lyft operations in the New York Tri-State Area. Evidence has cited that 25% of Lyft travel begins or ends at air, train or bus terminals and that Lyft has marketing partnerships with airlines and hotels. “The amount and nature of Lyft’s connections to interstate travel hubs lead the Court to conclude that its drivers do international trade even when they do not cross state lines in person.” It distinguished the cases where it was found that Ridesharing drivers did not fall within the scope of the exception regulation according to § 1, as “out of the obvious instinct that their journeys across national borders must be vanishingly rare”. “This instinct may resemble reality in San Francisco, about two hundred miles from the nearest land border with another state. Not so much in New York, New Jersey, Connecticut, and many other parts of the country. “

Most racetracks have yet to decide whether ridesharing drivers fall within the scope of § 1. Regarding Grice, the issue appears to have been resolved in the ninth circuit, but the problem remains unresolved in other circuits. Even the Third Circle that ruled Singh only ruled that ridesharing drivers could be exempted if they belong to a class of employees involved in international trade. However, it referred the case to the district court to rule on that issue. The case will likely revert to the third circuit which, along with the second and eleventh circuits, will likely soon be faced with a decision on whether Uber and Lyft drivers will fall within the scope of the exception in Section 1. Depending on the outcome of these cases, we may see a breakdown of the circuit that requires the Supreme Court to re-examine Section 1 and determine whether ridesharing riders are within the FAA’s scope.

Reprinted with permission from New York Law Journal May 14, 2021 © 2021 ALM Media Properties, LLC. All rights reserved. Further reproductions without permission are not permitted. Contact 877-257-3382 or [email protected].