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LEGAL ANALYSIS AND COMMENTARY FROM JUSTIA
Are Rideshare Drivers Like Uber's and Lyft's Subject to the Federal
Arbitration Act?
20 MAY 2021 I SAMUEL ESTREICHER, REX HEINKE AND JESSICA WEISEL
POSTED IN: COURTS AND PROCEDURE
Since the emergence of the gig economy, courts have struggled to fit workers
in such businesses into the traditional framework of employment law. One
common issue is whether the Federal Arbitration Act (FAA) applies to drivers
who work for rideshare companies Uber and Lyft. If the FAA applies,
predispute arbitration agreements covering federal and state statutory claims
will be enforced; if the FAA does not apply, enforcement will be a matter of
state law, and California and other states have made clear they will not
enforce such pacts.
Section 1 of the FAA provides that the FAA does not apply to "contracts of
employment of seamen, railroad employees, or any other class of workers
engaged in foreign or interstate commerce." 9 U.S.C. § 1. The Supreme Court
has interpreted this clause in two significant decisions. First, in Circuit City
Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Court held that the exception
only applies to transportation workers "engaged in foreign or interstate
commerce." Second, and more recently, the Supreme Court in New Prime
Inc. v. Oliveira, 139 S. Ct. 532 (2019), held that "contracts of employment"
included independent contractor agreements with interstate truckers.
Since New Prime, federal courts have decided several cases involving
rideshare drivers for Uber and Lyft that have considered the scope of § 1.
Their decisions have largely addressed two questions left open by New Prime
that are necessary to decide if rideshare drivers are "transportation" worker
"engaged in . . . interstate commerce" and, thus, not subject to the FAA.
The first question is whether the § 1 exception is limited to transportation
workers who transport goods, or if it extends to rideshare drivers who
transport people. This question stems from language in Circuit City that
"Congress' demonstrated concern with transportation workers and their
necessary role in the free flow of goods" justified extending the § 1 exception
to truckers. 532 U.S. at 121 (emphasis added). Relying on this language. Uber
and Lyft have argued their drivers are not covered by the exception because
they transport passengers, not goods.
The majority of courts have rejected this argument. The Third Circuit
examined the history of the FAA and the understanding of the terms
"seamen" and "railroad employees" at the time the FAA was enacted. The
court looked to two statutes passed contemporaneously with the FAA that the
Supreme Court cited in Circuit City to explain why Congress may have
excluded seaman and railroad employees in§ 1. Those statutes-the
Transportation Act of 1920 and the Railway Labor Act of 1926-regulated
railroad carriers that contained sleeping cars, which meant they transported
passengers. Because railroad employees at the time would have included
those who worked on passenger trains, the Third Circuit reasoned that"§ 1 is
not limited to transportation workers who transport goods, but may also
apply to those who transport passengers . ... " Singh v. Uber Techs. Inc., 939
F.3d 210, 223 ( 3d Cir. 2019). Further, the court noted that Circuit City's use
of "goods" was "convenient shorthand to discuss interstate commerce." Other
courts have agreed. See, e.g., 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 reasoning, the authority on the goods/passengers issue is not
uniform. In Tyler v. Uber Technologies, Inc. , a district court relied on pre
Circuit City law in the D.C. Circuit, and, constrained by that law, held§ 1"
'only excludes from the provisions of the Act the employment contracts of
workers engaged in the transportation of goods in commerce.' " (quoting Cole
v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1471 (D.C. Cir. 1997)). In Osvatics v.
Lyft, Inc., a different district court in the District of Columbia reached the
opposite conclusion. This creates an intra-circuit split that the D.C. Circuit
may need to resolve. If that court agrees with Tyler, or another circuit holds§
1 only applies to workers who transport goods, the Supreme Court would
need to resolve a circuit split.
The second significant question left undecided by New Prime is what
constitutes "engaged in . . . interstate commerce" and whether it applies to
rideshare drivers. To qualify for the FAA exception, must a driver transport
passengers across state lines? Must that be a regular activity? Or is it
sufficient that they transport passengers from other states or countries-as
drivers taking passengers to and from airports commonly do? On this issue,
the courts are more divided.
As a general rule, courts do not decide the scope of the § 1 exception based on
the tasks performed by the individual plaintiff, but on "whether the class of
workers to which the complaining worker belonged engaged in interstate
commerce." See, e.g., Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 800
(?th Cir. 2020). This largely depends on the role drivers play in relation to
the employer's business and does not depend on the workers actually
crossing state lines. For instance, the Ninth Circuit has held that drivers who
complete "last mile" deliveries for Amazon products that routinely originate
from another state "form a part of the channels of interstate commerce" even
though they rarely crossed state lines. Rittmann v. Amazon.com, Inc., 971
F.3d 904, 917 (9th Cir. 2020), cert. denied, 141 S. Ct. 1 374 (2021).
Conversely, the Wallace court noted that drivers who deliver food from local
restaurants are not engaged in interstate commerce.
Applying this test to Uber and Lyft, a good number of courts have held that
rideshare drivers are not engaged in interstate commerce. In re Grice
reasoned that rideshare drivers are much like cab companies, serve only a
local area, and, thus, "have an 'only casual and incidental' relationship to
interstate transit." Other cases acknowledge that drivers may regularly
transport interstate travelers, particularly to and from airports, but
nonetheless find that the class of drivers do not "perform an integral role in a
chain of interstate transportation." Capriole v. Uber Techs., Inc., 460 F.
Supp. 3d 919, 9 32 (N.D. Cal. 2020) (citing statistics that only 2.5% of Uber
trips crossed state lines and only 10% of all trips began or ended at airports);
Hinson v. Lyft, Inc., 2021 WL 838411, at *7 (N.D. Ga. Feb. 206, 2021) (while
Lyft drivers may affect interstate commerce, they "as a whole are not in 'the
particular business of offering interstate transportation to passengers' ").
Other courts have reached the opposite conclusion. In Haider v. Lyft, Inc. ,
for example, the court focused on the particular nature of Lyft operations in
the New York Tri- State Area. It cited evidence that 25% of Lyft trips begin or
end at air, train, or bus terminals and that Lyft has marketing partnerships
with airlines and hotels. The "quantity and nature of Lyft's connections to
hubs of interstate travel lead the Court to conclude that its drivers engage in
interstate commerce even when they do not personally cross state lines." It
distinguished the cases finding that rideshare drivers did not fall within the
scope of the§ 1 exemption as turning "on an apparent instinct that their trips
across state lines must be vanishingly rare." "That instinct may resemble
reality in San Francisco, some two hundred miles from the closest land
border with another state. Not so much in New York, New Jersey,
Connecticut, and many other parts of the country."
Most circuits have yet to render decisions on whether rideshare drivers fall
within the scope of§ 1. In re Grice appears to have resolved the question in
the Ninth Circuit, but the issue remains unsettled in other circuits. Even the
Third Circuit, which decided Singh, merely held that rideshare drivers may
fall within the exception if they are in a class of employees engaged in
interstate commerce. However, it remanded the case to the district court to
decide that question. The case is likely to return to the Third Circuit which,
along with the Second and Eleventh Circuits are likely to soon be faced with
deciding whether Uber and Lyft drivers fall within the scope of the exception
in § 1. Depending on the outcome of those cases, we may see a circuit split
that will require the Supreme Court to revisit § 1 and decide whether
rideshare drivers fall within the scope of the FAA.
SAMUEL ESTREICHER
Samuel Estreicher is the Dwight D. Opperman Professor, Director, Center for Labor
and Employment Law and Co-Director, Institute of Judicial Administration, NYU
School of Law.
REX HEINKE
Rex Heinke is a member of the California Appellate Law Group and was former co
head of Akin Gump's Supreme Court and Appellate Group.
JESSICA WEISEL
Jessica Weisel is an experienced litigator and member of the California Appellate Law
Group handling civil appeals, writs, and substantive trial court motions for businesses
and individuals.