Court deals setback to Uber drivers in background check lawsuit

Reuters News
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Posted: Sep 07, 2016 10:58 AM

By Daniel Wiessner

(Reuters) - A U.S. appeals court on Wednesday shifted most of a lawsuit challenging background checks performed by Uber Technologies Inc on its drivers to arbitration.

The 9th U.S. Circuit Court of Appeals in San Francisco said agreements signed by the two former drivers who filed the proposed class action lawsuit "clearly and unmistakably" required a private arbitrator, not a federal judge, to decide whether the claims should be kept out of court.

The 2013 lawsuit said Uber violated a federal law and various California laws when it barred the plaintiffs from signing into the service because of issues with their consumer credit reports.

Wednesday's decision partially reversed a 2015 ruling by a federal judge who said that even if the agreements were clear, they were unfair to the drivers.

The appeals court, however, said the drivers could not be forced to arbitrate claims brought under a unique California law that allows plaintiffs to sue for labor law violations on behalf of the state.

Uber lawyer Theodore Boutrous applauded the decision. "Arbitration is a fair, speedy and less costly alternative to class-action litigation," he said in a statement.

Lawyers for the drivers did not respond to requests for comment.

The case is one of many accusing San Francisco-based Uber of violating various employment-related laws. Drivers in more than a dozen states have filed lawsuits saying the company misclassified them as independent contractors to avoid paying the minimum wage and overtime. At least four of the cases have been sent to arbitration.

In the most high-profile of those lawsuits, a federal judge in San Francisco last month rejected a proposed settlement worth up to $100 million for about 385,000 drivers in California and Massachusetts. The judge said the deal would have shortchanged the drivers and the state of California, which could receive millions of dollars in penalties if the plaintiffs prevail at trial. [L1N1B01T9]

Wednesday's decision could have a major effect on that case since that judge had previously ruled that arbitration agreements signed by the drivers were invalid. Only a small fraction of the drivers involved in the lawsuit opted out of the agreement, according to court documents.

(Reporting by Daniel Wiessner in Albany, New York; Editing by Lisa Von Ahn)