The Supreme Court on Monday declined to hear requests by ride-hailing companies Uber and Lyft, which sought to block lawsuits filed by the state of California seeking compensation from tens of thousands of drivers.
Without comment, the judges rejected the requests of both companies. They said the issue is about arbitration agreements between drivers and companies.
A federal appeals court last year ruled that state labor officials are not bound by arbitration agreements they did not sign or enforce.
In their appeal to the Supreme Court, lawyers for Uber and Lyft, joined by a coalition of California employers, argued the Federal Arbitration Act overrides state laws and bars broad lawsuits seeking money from workers who have agreed to arbitrate claims as individuals. They said the case “represents California’s latest attempt to create a loophole” in the law.
Four years ago, California Atty. Gen. Rob Bonta and Labor Commissioner Lilia Garcia-Brower sued the ride-hailing companies for “misclassifying drivers as independent contractors” rather than employees.
This left “workers without protections such as paid sick leave and driver reimbursement, as well as overtime and minimum wages,” Garcia-Brower said at the time. The lawsuit sought money for “unpaid wages and penalties owed to employees to be distributed to all drivers who worked for Uber or Lyft at the time of the lawsuit.”
The lawsuit continued even after voters approved Proposition 22 in 2020 to respect companies’ authority to classify drivers as independent contractors.
Last year, a federal appeals court in San Francisco ruled that federal lawsuits could continue because federal officials refused to be bound by arbitration agreements.
“The people and the labor commissioner are not parties to the arbitration agreements requested by Uber and Lyft,” said Justice Jon Streeter of the California appeals court. He said government officials do not sue drivers, instead they use civil service laws.
“Relevant legal systems authorize individuals and the labor commissioner to submit the applications (and seek relief) referred to here,” he said. “The government officials who introduced these measures are not removing their authority from individual drivers but from their independent authority to take enforcement action.”
In January, the state Supreme Court refused to hear the appeal. Uber and Lyft then asked the US Supreme Court to review.
In recent years, the hardline high court has often clashed with California judges on arbitration and ruled against businesses that sought to limit lawsuits.
Two years ago, the justices struck down part of a state law that authorized private attorneys to file class action lawsuits, even though they had agreed to be bound by individual arbitration.
The California Employment Law Council, which represents about 80 private employers in the state, had urged the court to hear Uber’s case and rule that the state should not terminate arbitration agreements.
“California courts have been clear. They don’t like arbitration,” said Paul Grossman, a Los Angeles-based attorney with the Paul Hastings firm that represents private employers.
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