2. Check your independent contractor/payroll and hourly exposure. We have helped several customers resolve these issues. Work with a lawyer immediately (i.e., don`t wait for the lawsuit to be filed), and if you get an ESD audit, have your CPA work with your lawyer. Damaria Rosales (Rosales) was an Uber driver under a written agreement with Uber Technologies (Uber) that states she was an independent contractor. The agreement required all disputes to be resolved by arbitration under the Federal Arbitration Act (FAA) and delegated decisions to the arbitrator as to the applicability or validity of the arbitration provision. The arbitration agreement was part of Uber`s then-standard technology services agreement that Rosales signed online when she became a driver for Uber in March 2016. Second, companies that have entered into arbitration agreements, whether they apply to employees or independent contractors, or both, should consider the risks associated with initiating arbitration or arbitration by reference provisions published by another person or entity, and should not assume that such arbitration provisions that have been incorporated by reference will necessarily be subject to review by California courts. In this case, the arbitration provisions that the Court of Appeal found to be illegal were contained in the CAR`s Articles of Association, which were incorporated by reference into the independent contractor agreement between the claimants and Award, Inc. December has been a very slow month for court decisions involving independent contractors, but the two decisions reported below confirm that effectively worded arbitration clauses remain one of the two “best friends” of companies that hire independent contractors. The same day that the U.S. Supreme Court upheld its decision in New Prime Inc. v.
Oliveira in January 2019, we predicted here that, despite the exuberance of some commentators and the despair of others, the decision “may have little or no impact on whether workers classified as independent contractors can be forced to settle their claims of IC misclassification.” In New Prime, the Supreme Court ruled that a court, not an arbitrator, should decide whether a CI falls under the exclusion from arbitration of the Federal Arbitration Act for workers engaged in interstate transportation. We noted that the FAA is not the only basis on which companies can try to force arbitration. Most state arbitration laws, which typically do not include exclusions for interstate transportation workers, can also provide an alternative basis for forcing arbitration for IC misclassification class actions. This is exactly what happened in one of the two IC arbitrations we discuss below. Wage and hourly claims are often filed in the form of class actions. There could also be an ESD audit. In an action based on “misclassification,” the company`s only defense will be that the worker is an independent contractor, which has always been difficult to establish and has become much more difficult. The bottom line, in our opinion, is that in most situations, the company will lose the battle for the independent contractor.
If you are a business owner who has hired many independent contractors in the past, we recommend contacting a law firm to see what can be done to reduce your exposure. There may be legal steps you can take before a lawsuit is filed. If you would like us to examine your situation confidentially, please contact our law firm. INSTACART SUCCEEDS IN ENFORCING ARBITRATION BY DEMONSTRATING THAT DELIVERY AND PERSONNEL BUYERS ARE NOT INTERGOVERNMENTAL TRANSPORTATION WORKERS. An Illinois federal court has ordered delivery customers and personal buyers who provide services to Instacart to individually arbitrate wage and hourly claims arising from their alleged misclassification as independent contractors. Instacart is a California-based technology company that connects customers and personal shoppers, drivers, and delivery people through the Instacart website and its smartphone app to enable same-day grocery and on-demand delivery services in major metropolitan areas, including Illinois. The three aforementioned plaintiffs filed the proposed class action lawsuit against Instacart on its own behalf and similarly positioned personal buyers for alleged violations of the Fair Labor Standards Act and various payroll and hour laws in Illinois. Prior to the commencement of their relationship with Instacart, each plaintiff signed an independent contractor agreement, including an arbitration clause with a class action waiver.
In acceding to Instacart`s request to enforce the arbitration, the tribunal concluded that the parties had agreed that the agreement should be governed by the Federal Arbitration Act; there is a written arbitration agreement between the parties, from which none of the named claimants have withdrawn, although everyone has had the opportunity to do so; each operational agreement contained provisions in which Buyer agreed to bring claims against Instacart only on an individual basis and not in a class action or other representative proceeding. and the claimants` claims fell within the scope of the arbitration agreement. In addition, the court rejected the plaintiffs` argument that they were fulfilling the exemption from the federal arbitration law for transportation workers, noting that “while Instacart`s business model may depend on a number of internet transactions that connect customers and buyers, neither Instacart nor Instacart Shoppers operate in the company to transport goods across state borders.” The Court also concluded that the FAA`s requirement that courts enforce arbitration agreements in accordance with their terms “includes the application of terms that reflect the parties` intention to `apply individualized proceedings instead of class actions or class actions.` O`Shea v. Maplebear Inc. d/b/a Instacart, No. 19-cv-06994 (N.D. Ill. December 21, 2020). This new law applies to employee arbitration agreements entered into after January 1, 2020 – unless it is unenforceable. Then. Justice Elizabeth A.
Grimes disagreed. She criticised the narrow interpretation of the agreements by the majority. Grimes J. noted that arbitration clauses such as this one at issue had been consistently interpreted as applying to non-contractual disputes. In addition, it noted that the resolution of drivers` claims requires determining whether the agreements determine the compensation of drivers or whether the Labour Code controls. Citing AT&T Mobility LLC v. United States Supreme Court Convention, 131 P. Ct. 1740 (2011) (which requires the enforcement of consumer arbitration agreements under the Federal Arbitration Act despite the existence of class action waivers in violation of California contract law), Justice Grimes also suggested that the majority opinion amounted to “a court rule prohibiting arbitration of wage and hourly claims under the Labor Act in any contract purporting to be with a contractor.
independent. , even a treaty that interferes with interstate trade,” in violation of the Federal Arbitration Act. AB 51, as summarized in a previous blog post, would make it illegal for employers to impose arbitration agreements on employees as a condition of employment, even if employees are allowed to withdraw. The employee usually performs work in a company or self-employed trade that corresponds to the work he does for the company. If these conditions cannot be proven, the employee would be classified as an employee rather than an independent contractor, and would therefore be entitled to California wage and labor benefits such as minimum wage, paid sick days, overtime, workers` compensation, and unemployment insurance. The law is also likely to be illegal, except perhaps for jobs in the transportation industry. According to the Supreme Court, the Federal Arbitration Act (FAA) prohibits states from enacting laws that treat arbitration agreements differently from other agreements. If the parties agree to arbitrate, there is an enforceable treaty and States must avoid it. It`s a bit too simplistic, but not much.
However, the FAA does not apply to certain parts of the interstate transportation industry, so California law can only be enforced for this small segment of jobs. The applicability of this law will be examined by the courts. Employers who hire independent contractors must take prompt action to comply with AB 5, as it is now in effect until it is perceived differently. The steps an employer must take should be developed and prioritized with a lawyer so that there is no legal dispute. Employers must remain informed of the status of legal challenges to the law until the final decision is made. Whether the company uses employees or independent contractors, arbitration agreements must be reviewed by competent lawyers before using or executing the agreement. I have my own opinion on whether arbitration clauses are a good idea, but if you do business in California, you need to be aware of the problems you face when entering into an arbitration agreement. AB 5 makes it harder for companies to classify workers as independent contractors by codifying and expanding the so-called “ABC test” introduced by Dynamex Operations West against the Angeles Superior Court of Law, a case decided by the California Supreme Court in April 2018. (See our previous articles here and here). On appeal, Uber argued that the FAA governs the arbitration provision and that under the FAA, the parties` agreement to delegate the issue of arbitrability to the arbitrator is enforceable. The Court of Appeals disagreed, relying on earlier California Supreme Court decisions that explicitly stated that the FAA does not regulate PAGA claims.
Uber has also relied on cases in the Federal District Court, which in other contexts has held that an arbitrator must decide the issue of employee threshold classification if the arbitration agreement allows it. However, the Court of Appeal concluded that these cases were not applicable because no case was an AMAP application […].