McGrath v. Doordash, Inc.

Background

Jacob McGrath filed a nationwide collective action under the Fair Labor Standards Act (FLSA) against DoorDash, Inc. He alleged that DoorDash classified Dashers as independent contractors rather than employees and failed to pay them the required minimum wage. His theories included being paid about $4 per hour for a typical 15-hour workweek, not being paid for driving to restaurants or waiting for orders, and not being reimbursed for business expenses such as gasoline.

About 4,000 people had filed consent forms to join the case. McGrath had opted out of DoorDash’s arbitration agreement in November 2018. DoorDash moved to compel arbitration for the opt-in plaintiffs who had not validly opted out.

Arbitration Agreements and Contract Formation

The court found that a person could not become a Dasher without creating a DoorDash account and accepting an Independent Contractor Agreement. The sign-up screen included a checkbox agreeing to the agreement, which was available through a visible hyperlink. The person could review the agreement before accepting it, and the sign-up process would not continue without acceptance.

The agreements included a broad arbitration provision covering claims concerning the agreement, the contractor’s classification, services provided to consumers, payments, and other aspects of the relationship with DoorDash, including claims under the FLSA. They also included a waiver of class, collective, and representative actions. Contractors had 30 days to opt out. Earlier agreements allowed opt-out notices by email; later agreements required a signed letter sent by mail.

The plaintiffs argued that DoorDash had not shown that the opt-in plaintiffs entered arbitration agreements. The court rejected that argument because DoorDash provided evidence of the sign-up process, and the plaintiffs did not submit declarations from the approximately 4,000 opt-in plaintiffs disputing that they entered such agreements.

Federal Arbitration Act Exemption

The plaintiffs argued that the Federal Arbitration Act (FAA) did not apply because Dashers were transportation workers engaged in interstate commerce. The court rejected that argument. It relied on its earlier decision involving app-based drivers and on the Ninth Circuit’s decision concerning Amazon Flex delivery providers. The court distinguished Amazon Flex because those workers transported packages that remained in the stream of interstate commerce, while DoorDash workers primarily delivered prepared meals from local restaurants. The court stated that there was no indication that Dashers crossed state lines significantly more often than the drivers considered in the earlier decision.

Impartiality of the Arbitration Process

The plaintiffs argued that DoorDash’s newer agreement, which changed the arbitration provider from the American Arbitration Association to the International Institute for Conflict Prevention & Resolution (CPR), created an unfair process. They pointed to evidence that DoorDash’s counsel had communicated with CPR during development of CPR’s mass-claims protocol and argued that the protocol could delay thousands of arbitration claims.

The court rejected the contract-formation argument. It found that CPR had consulted a variety of stakeholders, that DoorDash’s counsel did not control the protocol, and that the protocol was publicly available rather than tailored only to DoorDash. The court also found the protocol facially fair because test cases were selected randomly, claimants had a greater role than respondents in selecting the arbitrator, and claimants could return to court after the mediation process. The court did not decide any unconscionability argument, explaining that the arbitration agreement delegated that issue to the arbitrator. It also expressed no opinion about whether an arbitration decision could later be challenged for lack of impartiality.

Opt-Out Address and Individual Opt-Outs

The plaintiffs raised a concern that the arbitration agreement and DoorDash’s website listed different addresses for opt-out notices. The court found that issue moot because DoorDash acknowledged that three opt-outs sent to the website address were valid and stated that it would honor timely opt-out letters sent to either address.

The court recognized valid opt-outs by McGrath, Derrick Salmons, Lisa Benningfield, and Adrian Davis. DoorDash challenged Vickie Smiley’s opt-out because she sent it by email even though her agreement required mailed notice. The court found Smiley’s opt-out ineffective. It noted that earlier agreements had allowed email notices but found no indication that DoorDash changed the requirement to make opting out more difficult.

Disposition

The court granted DoorDash’s motion to compel arbitration. McGrath, Salmons, Benningfield, and Davis were permitted to proceed with their claims in court. Smiley and the remaining plaintiffs were compelled to arbitration, and their cases in the court were stayed pending arbitration. The court administratively terminated the previously filed motion for conditional certification because the parties would likely file a new motion. The order was signed by Judge Edward M. Chen on November 5, 2020.