Some companies, including Uber, Lyft, home cleaning company Handy and DraftKings, are turning to arbitration to avoid potential class-action lawsuits.
“All of these so-called sharing economy companies that call themselves technology companies, they all have it, we’re seeing it in all of those cases, ” said Shannon Liss-Riordan, a Boston lawyer who has targeted Uber, Lyft and Handy, along with other companies, over how workers are classified as contractors instead of employees. “This is a tactic the companies have come up with in order to try and shield themselves from class-action litigation.”
The companies say they include arbitration agreements in their terms and conditions because it is a cheaper and faster way to deal with disputes than going through the court system.
But consumer and employee attorneys say the agreements stop groups of people who have been allegedly wronged from being compensated, because plaintiffs and lawyers often don’t want to spend the time and money to win small damages in individual cases.
Lyft next month will ask a Boston judge to throw out a suit alleging worker misclassification, citing an arbitration agreement contained in its drivers’ terms and conditions.
“Lyft’s Terms of Service contain a valid and enforceable arbitration provision that requires the parties to submit ‘any legal disputes or claims arising out of or related to the Agreement’ to binding arbitration. The arbitration provision further states that any claim or action must be brought on an individual basis,” the company said in a court filing.
The suit, which is being brought by Liss-Riordan, is seeking class-action status, which would include anyone who has driven for Lyft.
But if the judge decides the case should go to arbitration instead, each driver must bring his case individually.
Lyft declined to comment.
Arbitration is similar to a trial and is binding, but is not restricted by the rules of evidence, according to Paul Klaas, a professor at Harvard Law School who teaches an arbitration course.
“The benefits of arbitration are said to be that it’s much more informal, it’s much faster and much less expensive than full blown American litigation,” Klaas said. “What don’t apply are all the rules of civil procedure and all the rules of evidence.”
Arbitration agreements are hardly limited to employment contracts.
“It’s the rare business of any size, especially in the consumer space, that doesn’t have an arbitration provision,” said John Roddy, a Boston lawyer who has brought consumer suits against Uber and DraftKings.
Uber has argued for arbitration in Roddy’s case, as well as a worker misclassification suit brought by Liss-Riordan in California. The company declined to answer questions, instead referring to court filings. The filings say Uber’s arbitration agreements are clearly marked in its user and driver agreements, and are legal.
DraftKings and Handy did not respond to multiple requests for comment.
