Uber Technologies Inc drivers are not exempt from a U.S. law requiring them to bring work-related legal disputes in private arbitration rather than joining class action lawsuits in court, a U.S. appeals court ruled on Wednesday.
A panel of the Philadelphia-based 3rd U.S. Circuit Court of Appeals said that Uber drivers do not qualify for an exemption from the arbitration law for workers involved in interstate commerce because they rarely cross state lines when transporting passengers.
A San Francisco-based appeals court came to the same conclusion in a 2021 case involving Uber, and an appeals court in Boston that year said Lyft Inc drivers were required to arbitrate legal claims against the company.
The case hinged on whether Uber's drivers are interstate employees, and found that they are not. (iStock / iStock)
Uber and lawyers for the drivers did not immediately respond to requests for comment.
The ruling came in a proposed class action accusing Uber of misclassifying drivers as independent contractors rather than employees, who would be eligible for overtime pay and reimbursements for work-related expenses and who can cost a company up to 30% more than contractors.
The Federal Arbitration Act requires the enforcement of agreements to bring employment-related disputes in arbitration rather than court, but exempts transportation workers engaged in interstate commerce. A majority of private-sector U.S. workers, and most Uber drivers, have signed such agreements.
Car offering both Uber and Lyft rides. (AP / AP Newsroom)
The question of whether the exemption applies to Uber drivers and other gig workers is crucial because it determines whether they can bring large-scale class actions or must individually arbitrate legal claims. Arbitration is often impractical because of the small sums at stake in individual cases.
The 3rd Circuit on Wednesday said evidence presented in the case showed that nearly two-thirds of Uber drivers never cross state lines, and only 2.5% of Uber trips are interstate. Even when drivers do make such trips, it is incidental to their work, the three-judge panel said.
After dropping off passengers at a Broadway play, Johan Nijman, a for-hire driver who runs his own service and also drives for Uber on the side, drives through the West Side of Manhattan on Aug. 8, 2018, in New York City. ((Photo by Drew Angerer/Getty Images) / Getty Images)
"Take away interstate trips, and the fundamental character of Uber drivers' work remains the same," Circuit Judge Anthony Scirica wrote for the court.
The ruling affirmed a New Jersey federal judge's 2021 decision to send the claims to arbitration.