We have written here about the efforts of several gig economy companies like DoorDash to avoid having to conduct – and pay for – thousands of individual arbitrations alleging that their workers had been misclassified.
As we have said before, companies that implement arbitration agreements with class action waivers must be careful what they ask for. By using such agreements, they run the risk of dozens, hundreds or even thousands of individual arbitrations, the cost of which could threaten the companies’ very existence. (In California, we estimate that the arbitration costs alone for a single-plaintiff case are approximately $60,000 – which does not include the attorney’s fees in defending that case or the potential exposure.) It is for that very reason that some companies have elected not to implement such agreements.
Recently, after being ordered by a federal judge in Oakland to conduct thousands of individual arbitrations pursuant to the terms of its own arbitration agreements, Postmates filed a separate federal suit in Los Angeles seeking a temporary restraining order to avoid individual arbitrations.
Postmates’ hope that a different federal judge would reach a different conclusion is not off to a promising start. On April 15, 2020, United States District Court Judge Philip S. Gutierrez denied Postmates’ emergency motion for a temporary restraining order to put a halt to the thousands of individual arbitrations because they would be too expensive for the company and because they amounted to a “de facto class action.”
There is little in Judge Gutierrez’s order to give Postmates much hope that they will be able to avoid having to conduct and pay for thousands of individual arbitrations other than a suggestion that an arbitrator could find that the thousands of arbitrations constitute a “de facto class action.” It is difficult to predict whether that would happen as Postmates still must answer the question that any court or arbitrator will have: “How can you argue on the one hand that drivers cannot bring their claims together, and argue on the other hand that the drivers cannot bring their claims individually?”