The district court in Mohamed et al v. Uber Technologies, Inc., struck down employment arbitration agreements, calling them procedurally and substantively unconscionable. This decision is “the latest front in the assault against the enforceability of arbitration agreements,” says Brian Koji Tampa, FL, cochair of the ABA Section of Litigation’s Employment & Labor Relations Committee. Section leaders believe the decision is a signal for attorneys to consider rethinking the language contained in arbitration agreements.

Finding a Car: Background

The plaintiffs electronically signed arbitration agreements to become drivers for Uber, a transportation company that uses apps to connect riders with drivers. Uber, whose website promises that drivers can “be your own boss,” contends its drivers are independent contractors, while the driver plaintiffs contend they are employees.

The plaintiffs filed suit against Uber, alleging several claims, including putative class claims under the federal Fair Credit Reporting Act (FCRA). Uber moved to compel arbitration under the terms of its contracts with the plaintiffs. Multiple agreements were at issue, each containing an arbitration provision. The agreements purported to reserve to the arbitrator questions of the validity of the arbitration provision, precluded the pursuit of class action or private attorney general (PAGA) claims, and required the employee to share the cost of any arbitration. Based on those provisions, the U.S. District Court for the Northern District of California refused to force arbitration. The court reached the validity of the arbitration clauses after first determining that the delegation of the question of validity to the arbitrator was not sufficiently clear because of “inconsistencies” in the contracts. Key among those “inconsistencies” was that the contracts required arbitration but also included a forum selection clause in the case a dispute was brought to court.

Starting the Meter: Procedural Unconscionability and Inconsistency

The court found several variations of the contract to be procedurally unconscionable. One contract was procedurally unconscionable because it failed to provide a meaningful opt-out provision and did not draw the drivers’ attention to its existence. Another, which corrected these problems, was procedurally unconscionable because it “failed to notify drivers of a specific drawback” in that the drivers “may be required to pay considerable forum fees” and because the drivers “would feel at least some pressure not to opt out of the arbitration agreement.”

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