Buffalo Law Journal – Uber drivers: Proceed with caution

June 27, 2017

As Uber faces a storm of legal action, the ride-sharing company is readying to open operations in the Buffalo area.

With hundreds of Western New Yorkers signing up to drive for Uber, a look at the fine print of what they are signing up for may be in order.

Under a mandatory arbitration clause in the terms of use, drivers could be in for a surprise should something go wrong with their experience with the company. When drivers sign up to work for the company, they agree to several provisions when it comes to possible litigation with Uber, said former Magistrate Judge Carol Heckman, now a partner at Lippes Mathias Wexler Friedman LLP. She specializes in arbitration.

“First of all, they’re saying that any disputes between Uber drivers and Uber have to be arbitrated. They can’t go to the courts,” she said. “Drivers are waiving their right to a jury trial because arbitration does not have a jury trial and arbitration is final and binding. Any claims for class relief or collective action are waived, as well.”

Another aspect of the agreement is that any issues with the scope of the arbitration clause go to the arbitrator instead of the courts.

“What this achieves, from Uber’s point of view, is that they keep the number of reported cases on all of the issues to a very minimum,” Heckman said. “Arbitration is a confidential procedure.”

Uber and other ride-sharing services including Lyft open for business in Western New York on June 29. For Uber, it’s been a tumultuous time as several company leaders recently stepped down. CEO Travis Kalanick resigned June 20, a week after he started an extended leave of absence.

“This could go down as one of the best examples of how not to run a company, short of defrauding investors,” said Buffalo attorney Matthew Pelkey of Colligan Law LLP.

Kalanick stepping down is a chance for the company to change the culture and get back on track, he said.

“Investors had grown increasingly frustrated, even speaking out against leadership of the company,” Pelkey said. “The investors recognized the need to pivot in order to move forward.”

With several top leadership positions open in the company, it presents a chance to “hit the reset button,” he said.

“The real question which will remain is whether that will be enough to change course for the entire company,” Pelkey said. “That’s what everyone, including investors, will be keeping an eye on.”

An email with questions on Uber’s arbitration agreement was not returned by the time the paper went to press.

With the arbitration clause, if drivers wanted to engage in a class-action suit against Uber for price-fixing or violations of the Fair Debt Collection Practices Act, they would be unable to do so in court, according to Heckman. The clauses have changed due to a fair amount of litigation, which has led to an opt-out clause in the arbitration agreement. The opt-out clause allows for a driver to notify the company within 30 days that they don’t want to be part of the arbitration agreement.

“That’s how they’ve gotten around a lot of the court criticisms of arbitration clauses that waive class-action relief,” she said.

The issue is that drivers don’t always know about the opt-out clause, Heckman said, adding, “The trick, of course, is that many drivers don’t realize that opt-out clause is in there, and the 30 days go by and their right to opt out has gone by the wayside.”

Another issue with arbitration is fee splitting, she said. In court, the judge isn’t paid by the parties. In arbitration, the arbitrator is.

“It can be quite expensive,” she said. “It can be up to $7,000 a day that they’re paying. It gets split between the two parties.”

For instance, if it was an Uber driver and Uber, they could split the fee for the arbitrator.

“There is an argument out there that if the fees are so high, they effectively preclude someone’s ability to litigate a claim, that it’s invalid, that the clause would be unconscionable and not enforceable,” Heckman said.

In a recent 9th circuit case, she said Uber skirted the issue by paying all the arbitration fees for that particular case.

“That issue is still out there and hasn’t been resolved,” she said.

Uber conducts its arbitration through the American Arbitration Association. Heckman is on the association’s arbitration panel.

An email with questions for the association was not returned by press time.

Heckman said there is yearly training for arbitrators, and the parties can pick who the arbitrator will be.

“They’re given access to the Triple A panel, and they can choose whoever has the best qualifications for their particular dispute,” she said. “It isn’t like it’s just spit your issue into a computer and get an answer.

There are skilled, trained people involved doing these things, just like there are skilled, trained judges doing litigation.”

A positive aspect of the arbitration agreement is that it limits expensive litigation and the need to be in court for months or years. And that’s a positive for both the drivers and the company, she said.

“It can still take six months to a year, but at least it’s not six years or 10 years or 20 years,” she said, referring to the possible length of litigation.

“The attorney’s fees would be a lot less.”

The original article can be found on the Buffalo Business First website: