Davarci v. Uber Technologies, Inc.

Background

Sancak Davarci and Joseph Chambers, who worked as Uber drivers in New York State, sued Uber individually and on behalf of a proposed class of current and former Uber drivers in New York. They alleged that Uber misclassified its drivers as independent contractors rather than employees, violating the New York Labor Law.

Uber moved under the Federal Arbitration Act (FAA) to require the plaintiffs to arbitrate their claims individually, strike their class allegations, and stay the case during arbitration. The drivers’ agreements with Uber contained an arbitration provision covering disputes about their relationship with Uber, including whether they were employees and claims concerning wages and other labor-law issues. The agreements also required arbitration on an individual rather than class or collective basis. They included a process allowing drivers to opt out, but the court treated Davarci’s argument that he had opted out as abandoned because the plaintiffs did not raise it in their opposition brief.

The FAA exception

Section 1 of the FAA excludes from the statute’s coverage contracts involving certain transportation workers engaged in foreign or interstate commerce. The court first held that this exception can cover workers who transport passengers as well as workers who transport goods.

The central question was whether Uber drivers, considered as a nationwide class of workers, are engaged in interstate commerce within the meaning of Section 1. The court held that the relevant inquiry concerns the nature of the work performed by the class as a whole, rather than the individual travel patterns of Davarci or Chambers.

Court’s reasoning

The court concluded that Uber drivers are primarily local transportation workers. Uber’s data showed that 97.5 percent of Uber trips between 2015 and 2019 began and ended in the same state. The court found that occasional interstate trips and trips to airports, train stations, and bus stations do not make interstate transportation a central feature of the drivers’ work.

The court compared Uber drivers to local taxi drivers. It distinguished them from delivery workers who complete the final part of an uninterrupted interstate shipment controlled by an interstate company. In the court’s view, Uber drivers provide separate local rides, even when a ride happens to form part of a passenger’s larger interstate journey. The court also found that Uber’s relationships with airlines and airports did not establish the kind of contractual or operational connection that would make drivers part of a continuous interstate transportation system.

Ruling and effect

The court held that Uber drivers are not exempt from the FAA under Section 1. Because the plaintiffs did not contest the application and effect of the FAA and the arbitration agreement’s class-action waiver, the court compelled arbitration on an individual basis and struck the plaintiffs’ class claims.

The court granted Uber’s motion to compel arbitration and to strike the class claims. It stayed the action pending completion of individual arbitration. The court denied the plaintiffs’ request to dismiss the case instead of staying it, relying on Second Circuit precedent requiring a stay when all claims have been sent to arbitration and a stay has been requested.