Grocery Couriers Must Arbitrate Class Claims

SAN FRANCISCO (CN) - A class of grocery delivery drivers who say they were wrongly classified as independent contractors and denied benefits must seek relief through individual arbitration, a federal judge ruled.

Lead plaintiff Dominic Cobarruviaz sued grocery store delivery service MapleBear Inc., or Instacart, in San Francisco Superior Court in January. The class action was moved to Federal Court in February.

In July, the U.S. Department of Labor issued a memo stating that an increasing number of employers are misclassifying workers as independent contractors.

The Labor Department said courts must use a multi-factorial "economic realities" test to determine whether a worker is an employee or contractor. The test focuses on whether the worker is economically dependent on the employer or business.

However, in June 2013, the U.S. Supreme Court also upheld the enforcement of arbitration clauses in class actions - the same issue U.S. District Judge Edward Chen grappled with in his Nov. 3 ruling on Instacart's motion to compel arbitration.

Instacart is a company that dispatches workers to shop for, purchase and deliver groceries via a mobile phone app. It required its contractors to sign identical agreements with arbitration clauses, stipulating that the drivers must settle labor disputes through a private arbitrator rather than in the courts.

Chen found parts of the agreement stating workers must cover half the costs of arbitration and cover all of the company's legal costs if they lose to be "unconscionable."

However, the judge also determined the contract was not "permeated" with unfair clauses so he voided the fee-sharing and fee-shifting provisions while granting Instacart's motion to compel arbitration.

"Having severed the two challenged clauses, the Court finds that arbitration may be compelled," Chen wrote in his 20-page ruling.

The judge also found that the workers' claims for civil penalties under California's Private Attorney Generals Act could not be arbitrated, and he therefore excluded those claims from arbitration.

On the question of class-wide arbitration, Chen found the parties never agreed to settle labor disputes on a class-wide basis.

"The court determines that class wide arbitration was not specifically agreed upon by the parties and will compel arbitration on an individual basis only," Chen wrote.

The judge granted Instacart's motion to compel arbitration on an individual basis and stayed further litigation on the workers' California civil penalties claims pending the outcome of arbitration.

In June, Chen denied Uber's motion to compel arbitration over claims that it misclassified drivers as independent contractors. The judge found Uber "buried" its arbitration clause within the fine print of the second-to-last page of its agreement with drivers.

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