Mandatory arbitration clauses lurk in all kinds of standard form contracts, including those that govern the relationship between companies and their workers, whether they are classified as independent contractors or employees. Arbitration clauses combined with class action waivers threatened to be a powerful way for companies to prevent workers from suing over workplace disputes. But in February, U.S. Judge William Alsup issued an order compelling arbitration against a company that was trying to wriggle out of it.
That company was Door Dash who faced arbitration claims from 5,879 workers who disputed their labor classification and had clicked to agree to the terms of the company’s terms, which contained a “Mutual Arbitration Provision.” This was a contract that Door Dash had drafted, so what was the problem?
It has to do with fees. The American Arbitration Association (AAA) requires that individuals pay a filing fee of $300 and companies pay a filing fee of $1900. That’s over $11,000,000 in
arbitration filing fees for Door Dash.
Door Dash isn’t the first company to be faced with mass arbitration claims and hefty filing fees. Over 12,000 Uber drivers filed arbitration claims against Uber. The non-refundable filing fee for each claim is $1500 so that filing fees alone would cost over $18,000,000. Rest assured, there will be more such claims. Many, many more.
For years, academics, particularly those from the law & economics camp, have ardently defended the use of standard form contracts and mandatory arbitration clauses because they were efficient; they argued that their efficiencies should override fairness and consent problems. Now that plaintiffs attorneys are discovering how to use software to file claims more efficiently and on a mass scale, companies are discovering what it’s like to be on the receiving end of efficiency.
Judge Alsup’s motion notes the irony of companies trying to wriggle out of their own TOS:
“For decades, the employer-side bar and their employer clients have forced arbitration clauses upon workers, thus taking away their right to go to court, and force class-action waivers upon them too, thus taking away their ability to join collectively to vindicate common rights. The employer-side bar has succeeded in the United States Supreme Court to sustain such provisions. The irony, in this case, is that the workers wish to enforce the very provisions forced on them by seeking, even if by the thousands, individual arbitrations, the remnant of procedural rights left to them. The employer here, DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause. No doubt, Door Dash never expected that so many would actually seek arbitration. Instead, in irony upon irony, DoorDash, now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate. This hypocrisy will not be blessed, at least by this order.”
Ouch. And bravo.
(Previously posted at Contracts Prof Blog with minor editing changes)