Judge Finds Ride Sharing Company’s Arbitration Agreement With Network Drivers is Substantively Unconscionable

A California judge has reportedly declined to order a dispute between transportation network company Uber and a former driver to arbitration. In the case, a San Francisco Superior Court judge ruled that the arbitration clause between the parties was “substantively unconscionable” due to its contradictory language. According to Judge Ernest Goldsmith, one provision of the clause states a private arbitrator must determine whether any disputes between the company and its drivers should be resolved using arbitration. Another provision, however, provides that such a determination must be made by a judge. According to the San Francisco judge, the arbitration clause also clearly “favors Uber as a repeat player in the arbitration arena.”

The issue arose after the driver sought to be classified as an employee rather than an independent contractor for the ride sharing network. The California Labor Commissioner’s Office ruled the driver was an employee and Uber appealed the decision to the San Francisco court. Uber also asked the court to compel the dispute to arbitration based on an agreement signed by the driver before she joined the company in 2014.  A spokesperson for Uber has stated the ride sharing network will appeal the judge’s decision stating the arbitral provision is unenforceable because the “right to arbitrate disputes has been confirmed multiple times by the Supreme Court.”

Meanwhile, two other Uber drivers recently filed a charge with the National Labor Relations Board (“NLRB”) alleging the company’s policy regarding arbitration violates the National Labor Relations Act. According to the drivers, the ride sharing network unlawfully prohibits them from engaging in class action proceedings against it. Although the NLRB has sided with workers on such issues in the past, the United States Supreme Court ruled in 2013 that most arbitration agreements which waive class actions are enforceable.

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