By: Robert Orozco, Esq.
In a scathing opinion regarding the validity of employer-mandated arbitration provisions, U.S. District Court Judge William Alsup ordered the enforcement of an arbitration agreement by over 6,000 couriers employed by DoorDash who were allegedly misclassified as independent contractors.
In the matter of Abernathy, et al. v. DoorDash, Inc. (United States District Court Case No.: C-19-07545WHA), approximately 6,000 couriers individually filed arbitration demands with the American Arbitration Association (AAA) claiming that they were misclassified as independent contractors. Critically, the cost to file an arbitration under AAA rules is approximately $300 for the employee, with the employer responsible for an additional $1,900 for each claim filed against it, which under AAA rules were due within 30 days of the initiation of the claim. Consequently, from the onset, DoorDash was liable for approximately $13.2 million dollars in filing costs alone before any litigation activities would commence.
Quickly realizing the extraordinary numbers it was facing, DoorDash claimed procedural deficiencies with the couriers’ filings and refused to pay. As a result, AAA closed their files. Subsequently, the Abernathy plaintiffs filed Motions to Compel Arbitration for each individual claim. DoorDash opposed the Motions and requested a stay in the proceedings by citing to a concurrent class action lawsuit (Marciano v. DoorDash, Inc., San Francisco County Superior Court Case No.: CGC-18-567869) which had a pending settlement that would effectively bar the Abernathy plaintiffs’ claims. Curiously, DoorDash initially opposed the Marciano class action based on the class-action waivers contained within the Abernathy claims that DoorDash now wanted to declare null and void.
DoorDash’s two-pronged attack did not sit well with Judge Alsup, who concluded that DoorDash’s dual approach was “hypocritical” and, consequently, he would neither condone nor participate in the exercise.
“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 coast of the filing fees it agreed to pay in the arbitration clause. …This hypocrisy will not be blessed, at least by this order.”
In addition, Judge Alsup made another significant ruling regarding the conduct between DoorDash and the International Institute for Conflict Prevention & Resolution (CPR). CPR assumed arbitration duties following AAA’s closure of the files. Counsel for both DoorDash and CPR cooperated on drafting protocols regarding “mass filings” that were considered “an abuse of process.” CPR sought to seal the records, including its discussions with DoorDash, but Judge Alsup denied the request stating that he would not “… be a party to concealing this information from the public, especially as it concerns an arbitration organization that holds itself out to the public as impartial.”
While many employers may continue to prefer arbitration to litigation, the Abernathy decision – in association with California’s disputed ban on employment arbitration agreements – raises significant questions regarding the long-held benefits of arbitration, including confidentiality, cost savings, and speedier resolutions. Further, given the United States Supreme Court’s and the Federal Arbitration Act’s (FAA) approval of arbitration agreements, the issues currently facing the enforcement of arbitration agreements will not be readily resolved.
In the interim, until the courts resolve the issues raised in Abernathy and the apparent conflict between California’s arbitration ban and the FAA, it would be in the employer’s best interest to take a proactive examination of their current arbitration provision or at the very least, examine the policies and procedures that typically lead to employee grievances.
If you have any questions about this recent case or about arbitration provisions, please contact Robert A. Orozco. Robert is Counsel with Leech Tishman and a member of the firm’s Employment & Labor, Corporate, and Litigation Practice Groups. Robert is based in Leech Tishman’s LAX office and can be reached at 424.738.4400 or via email at firstname.lastname@example.org
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