A California federal court on Tuesday crushed a proposed labor class action against smartphone-based grocery delivery service Instacart by ordering workers to individually arbitrate their claims, but handed a partial win to the delivery drivers by keeping their claims for civil penalties alive in federal court.
U.S. District Judge Edward M. Chen concluded that the arbitration agreement signed by delivery drivers for Maplebear Inc., which does business as Instacart, is enforceable as long as two fee-related provisions are struck, and the contract itself provides no basis to allow the drivers to arbitrate their claims as a class rather than as individuals.
But Judge Chen concluded that the suit’s California Private Attorneys General Act claims for civil penalties on behalf of the state of California can proceed in federal court after the individual workers’ arbitrations conclude.
“The specific language of the agreement here underscores the parties’ intent to arbitrate disputes that arose between Instacart and the specific individual who signed the agreement, and there is no clear and unmistakable intent to arbitrate PAGA representative claims,” Judge Chen said.
Three delivery drivers, who also act as personal shoppers, sued Instacart in February, alleging they, and their colleagues nationwide, have been erroneously classified by the company as independent contractors when they are, in fact, employees of the company entitled to labor protections under the Fair Labor Standards Act and the labor codes of various states where they worked, including California, New York and Colorado.
According to Tuesday’s order, the drivers were required to electronically sign identical independent contractor agreements as a prerequisite to being hired. The agreement contains a clause requiring arbitration as a venue for dispute resolution.
Judge Chen concluded that fee-shifting and fee-splitting provisions in the agreement are substantively unconscionable, but said that they can be struck from the contract without damaging the agreement as a whole because it is not permeated with unconscionability. That means that the contract can stand alone even after striking the provisions and the workers are still required arbitrate their claims, he said.
The order denied the plaintiffs’ requests that they arbitrate their claims as a class, saying there is no evidence that the parties contemplated or agreed to class-wide arbitration.
“The arbitration clause does not mention the possibility of classwide arbitration, but instead focuses its scope on disputes that arise out of or are related to ‘services performed by the contractor’ or the agreement, which is specifically between Instacart and the individual contractor,” Judge Chen said.
When it comes to the suit’s PAGA claims, Judge Chen said nothing in the contractor agreement suggests the parties contemplated the claims of non-parties like the state’s labor law enforcement agencies would be subject to arbitration.
“The court will not assume, absent evidence to the contrary, that an agreement which explicitly focuses on claims between Instacart and the individual contractor would require arbitration of the claims on behalf of the state,” he said, noting that the U.S. Supreme Courthas recognized that “the FAA does not mention enforcement by public agencies; it ensures the enforceability of private agreements to arbitrate, but otherwise does not purport to place any restriction on a nonparty’s choice of a judicial forum.”
The parties and their attorneys were not immediately available to comment Wednesday.
The plaintiffs are represented by Robert S. Arns, Jonathan E. Davis and Julie C. Erickson of The Arns Law Firm and Jahan C. Sagafi and Michael Scimone of Outten & Golden LLP.
Instacart is represented by Benjamin Berkowitz, Rachael Elizabeth Meny, Nikki Khanh Vo and Ryan K.M. Wong of Keker & Van Nest LLP.
The case is Cobarruviaz v. Maplebear, Inc., case number 3:15-cv-00697, in the U.S. District Court for the Northern District of California.