On September 25, 2018, the Ninth Circuit Court of Appeals ended an aggressive five-year legal battle between Uber and its drivers regarding whether or not drivers should be considered employees versus independent contractors.  In O’Connor v. Uber, the court avoided the central issue of the proper classification of drivers by ruling that drivers suing for expenses and tips must submit their claims to arbitration in accordance with Uber’s driver agreement.  The Ninth Circuit’s opinion, which relied upon the U.S. Supreme Court’s ground breaking decision in Epic Systems v. Lewis, dealt a significant blow to drivers who can no longer pursue employment claims against Uber via a class-action claim in federal court, and instead must bring their claims individually to arbitration.

Due to the relatively limited pool of arbitrators in any given market, the time involved in pursuing claims individually, and the limited worth of individual wage-related claims, attorneys representing employees are less likely to pursue individual claims in arbitration.  As previously predicted by HR Legalist, the impact of the Epic Systems ruling is starting to be felt at the plaintiff’s bar. The O’Connor ruling gives employers a template to utilize class action waivers to reduce risk and to avoid large class-action claims, particularly in the area of wage and hour violations.  Arbitration agreements have the potential to transform cases potentially worth hundreds of millions of dollars into smaller, more manageable individual claims.

As noted in our prior post regarding Epic Systems, employers may still waive arbitration provisions and allow employees to bring class claims where advantageous to the employer if the alternative would be piecemeal arbitration of a large number of individual claims.  In addition, it remains to be seen how effective arbitration agreements will be under certain state laws.  For example, as a result of New Jersey’s 2018 pay equity law, it is now an unlawful employment practice to require employees to waive any protections provided under the New Jersey Law Against Discrimination (which provides for a trial by jury).