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Employees, Arbitration, and Worker Protection

On Behalf of | Jan 8, 2021 | Firm News |

Just before the Holidays, the U.S. District Court for the Northern District of Illinois handed down an important decision in the ongoing national dispute over the classification of so-called gig workers. The suit, O’Shea v. Maplebear, Inc., concerns a group of individuals who brought suit against the Instacart App (owned by Maplebear) alleging that the company failed to pay them the benefits that they were due as employees. Instacart defended the suit by arguing that each individual’s claim must be arbitrated separately under the employment contract that they had signed, and on December 21st the court agreed. O’Shea v. Maplebear Inc., No. 19 C 06994, 2020 WL 7490371 (N.D. Ill. Dec. 21, 2020).

As I’ve mentioned in the past, this arbitration vs. civil suit distinction is important, in part, because collective lawsuits may allow for the economical resolution of many similar claims that, on their own, may not be cost-effective to pursue. If, hypothetically, a company has shortchanged 1000 people by $100.00 in wages under similar circumstances, it makes a lot more sense from the perspective of the workers to resolve that matter in one lawsuit rather than 1000 separate arbitrations.

In this case specifically, the fundamental dispute is over the classification of the workers themselves, although the complaint alleges violations of various federal and state statutes and regulations as well as common-law torts. Instacart classified the shoppers, drivers, and delivery persons as independent contractors of the company, and set up their pay and benefits accordingly. The workers, on the other hand, argued in their complaint that their actual working conditions meant that they should properly have been classified as employees and afforded the various protections that come with that status.

The Federal Court did not get to the substance of the case, though, because Instacart pointed out that regardless of the workers’ status as employees or independent contractors or employees, they had all signed an employment agreement which said (depending on which specific position they were working in) either that

ANY AND ALL DISPUTES OR CLAIMS BETWEEN YOU AND INSTACART shall be exclusively resolved by final and binding arbitration by a neutral arbitrator…

Or that he Parties agree that to the fullest extent permitted by law any and all disputes, claims or controversies arising out of or relating to this Agreement or the Services performed by Contractor shall be resolved by final and binding arbitration by a neutral arbitrator…

Pursuant to the Federal Arbitration Act (“FAA”), the court found that (1) a written arbitration agreement exists between the parties; (2) the dispute between the parties fell within the scope of the arbitration agreement; and (3) the workers were refusing to comply with the arbitration agreement, meaning the court should order them to do so.

Notably, the workers didn’t really argue that any of these points were incorrect. Rather, they maintained that they fell within an exception to the FAA which exempted “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from such arbitration agreements. This is not a far-fetched argument—the courts in several other parts of the country have ruled such gig workers do fall into the so-called “transportation worker” exception to the FAA. However, the 7th Circuit (which covers Illinois, Indiana, and Wisconsin) is not one of them. In a very similar suit against the app Grubhub last summer, the Appellate Court ruled that delivery drivers for food delivery apps are not engaged in the act of moving goods across state lines in a manner that would qualify them for the transportation worker exception. Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 801 (7th Cir. 2020). Since they could find no relevant differences between the Grubhub workers and the Instacart workers on this point, the court in this case could not come to any other conclusion other than to send them to individual arbitration.

Attorney Travis Dunn