By Daniel Wiessner
(Reuters) – Uber Technologies Inc is facing a California lawsuit claiming it should have covered work-related expenses for UberEats drivers, the state’s top court said on Monday, in what could be a blow for businesses in America’s largest state and a victory for labor advocates.
California Supreme Court in unanimous decision says UberEats driver Erik Adolph did not waive his right under state law to sue on behalf of a large group of workers, even though he had signed an agreement to take his own labor-related legal claims to private arbitration. .
Adolph sued Uber in 2019, claiming the company wrongly classified UberEats drivers as independent contractors rather than employees, who must be reimbursed for labor costs under California law.
A unique California law called the Private Attorney General Act, or PAGA, allows workers to sue for labor law violations on behalf of the state and keep a quarter of the money they earn. The rest goes to the state to fund an agency that enforces labor laws.
The California Supreme Court said nothing in this law prohibiting workers from pursuing claims on their own behalf in arbitration while separately litigate large-scale claims in court.
The decision likely undermines the significance of a 2022 U.S. Supreme Court ruling involving Viking River Cruises that the companies could force individual PAGA claims into arbitration, and could mean California employers will facing larger-scale lawsuits.
Theane Evangelis, an attorney for Uber, said in a statement that Monday’s ruling conflicts with Viking River’s ruling and violates a federal law that requires the enforcement of valid arbitration agreements.
“We are looking at our appeal options,” she said.
Michael Rubin, who represents Adolph, said the decision could prompt companies to reconsider forced arbitration of workers’ claims if large-scale lawsuits against PAGA can still be brought to court. Rubin also represented the plaintiff in the Viking River case.
More than half of non-union American workers in the private sector are required to sign arbitration agreements as a condition of employment. The agreements generally prohibit them from filing or participating in traditional class action lawsuits.
Critics of mandatory arbitration say it discourages workers from bringing individual claims that involve small amounts of money, and that workers who take disputes to arbitration are more likely to lose.
Business groups argue that arbitration is faster and more efficient than the courts, allowing workers to recover more money. Trade groups hailed Viking River’s decision last year, saying it would prevent plaintiffs in California from using PAGA as a way to circumvent arbitration.
Groups including the U.S. Chamber of Commerce, the nation’s largest business lobby, filed briefs in Monday’s case warning the California Supreme Court that a ruling against Uber could encourage workers to sue. baseless lawsuits and pressure companies to settle them.
But the court said those concerns should be directed to state lawmakers, who have the power to change the law.
(Reporting by Daniel Wiessner in Albany, New York and Alison Frankel in New York; Editing by Alexia Garamfalvi and Josie Kao)