Binding Arbitration

Uber Ending Binding Arbitration for Sexual Assault Victims

Binding ArbitrationIn the wake of public pressure and a pending lawsuit, rideshare service Uber recently announced that it would be ending its practice of enforcing binding arbitration agreements for sexual assault victims. These agreements, which are commonly deployed across many industries, prevent customers from seeking financial compensation for damages through the civil court system, often to the detriment of their claims.

“A Silent Epidemic”

On May 15, 2018, Uber’s Chief Legal Officer Tony West issued a press release with the title “Turning the lights on.” In it, he announced that Uber, in keeping with its newfound commitment to “transparency, integrity, and accountability,” is changing company policy to address “a silent epidemic of sexual assault and harassment.” Among the changes that West announced are the following:

  1. Uber will no longer require mandatory arbitration for claims of sexual assault or harassment by riders, drivers, or employees.
  2. Uber will no longer require victims settling with the company to sign a confidentiality agreement preventing them from speaking about the sexual assault or harassment that they suffered.
  3. Uber will publish reports that will include data on sexual assaults and other incidents that occur on the company’s platform.

Prior to the announcement, Uber’s user agreements and work contracts required that all sexual assault and harassment claims be resolved through mandatory binding arbitration, which took place out of civil court and behind closed doors. Moreover, these agreements demanded that all details about any claims and settlements be kept private.

“A Dark Alley for Uber to Hide”

Uber’s reversal of these longstanding policies does not simply reflect a corporate change of heart. West’s announcement took place in the context of increased published scrutiny and legal action directed at the company, most recently in the form of an open letter from fourteen women purporting to be the sexual assault victims of Uber employees.

The letter, dated April 26, 2018, demanded that “Uber voluntarily release [them] from the arbitration provision contained in the consumer agreement to the Uber app so that [they] are able to pursue our claims of sexual assault, rape, sexual harassment, and gender-motivated violence through [the] court system, rather than in a confidential arbitration.”

The authors argued that Uber’s arbitration provision flies in the face of the company’s message that it “make[s] streets safer” and “do[es] the right thing, period.” Instead, “silencing [the victims’] stories deprives customers and potential investors from the knowledge that [their] horrific experiences are part of a widespread problem at Uber,” while the secrecy of arbitration “takes away a woman’s right to a trial by a jury of her peers and provides a dark alley for Uber to hide from the justice system, the media, and public scrutiny.”

Public Awareness Driving Uber’s Pivot

Perhaps nobody found Uber’s recent pivot more surprising than Jeanne Christensen, the attorney representing the letter’s authors. On March 15, she filed a lawsuit on behalf of nine female passengers seeking to remove the arbitration requirement and compel Uber to adopt more stringent safety measures, including fingerprinting all its drivers.

Prior to the press release, Christensen said that Uber had fought hard to keep the victims’ claims under wraps and that the letter was prompted by the company’s combative tactics.

“We wrote the open letter,” she explained, “since we were getting, by all indications, [the sense] that Uber was going to do more of the same and try to get this into arbitration.

“What’s happening is more and more riders are becoming aware of the dangers that are associated with this — and it’s really just because of our litigation,” Christensen continued. “It’s not because Uber has proactively messaged to women that this is a safety concern.”

Because of the industry’s emphasis on secrecy, it has been difficult to find an accurate tally of the total number of rideshare assault victims.

According to one estimate, over 200 women across the country have reported incidents of rape, sexual assault, stalking, kidnapping, and harassment by drivers for Uber, Lyft, and other services. Nevertheless, sexual assault remains a heavily underreported crime, with two out of three incidents going unreported to police, suggested that the number of rideshare-related assaults could be much higher.

Perhaps to protect itself from a wave of future lawsuits, Uber is placing limits on the types of legal remedies that sexual assault victims can pursue against the company. For instance, Uber is only allowing victims to bring cases individually, not jointly as a class action. Plaintiff advocates argue that this restriction severely limits the number of potential claims because it prevents victims from pooling their resources to reduce upfront expenses.

A Widespread Corporate Practice

It is worth noting that Uber is far from alone in insisting on binding arbitration agreements to resolve its disputes. Binding arbitration is a widespread practice across many industries today. In addition to Uber, mandatory arbitration clauses are also buried in the fine print of contracts for employment, cell phones, credit cards, retirement accounts, nursing homes, and other everyday agreements.

When you sign these contracts or even buy these products, you waive your right to take these companies to court, even for very serious damages. Instead, all disputes must be presented to and decided by arbitrators, private individuals hired by the companies themselves. The decisions of these arbitrators are not bound by state or federal law, and they are usually final, with no possibility for appeal.

While industry proponents argue that arbitration offers a more affordable, less drawn-out alternative to litigation that can better resolve disputes, opponents say that the deck is necessarily stacked against plaintiffs, who generally lack the resources of major companies to mount successful arbitration cases on their own. Critics also point to the fact that arbitrators, who depend upon repeat business from the companies who hire them, might be more incentivized in favor of the companies than judges or juries might be.

Binding Arbitration Still Key for Uber

And for all its high-minded rhetoric of late, Uber is far from phasing out binding arbitration as a key weapon in its conflict resolution arsenal.

Uber is removing its mandatory arbitration requirements only in cases involving sexual assault and harassment. All other disputes, including those involving payment, discrimination, and labor practices, will still be subject to binding arbitration– “Uber is like most other companies in that regard,” said West – at least for now. How much Uber and other companies can continue to enforce these mandatory arbitration agreements, though, remains a matter for the courts.

At the moment, multiple cases have been filed on behalf of thousands of Uber drivers who claim that they should receive the same legal rights and benefits as employees, instead of being classified as independent contractors. A successful outcome for these drivers depends upon a crucial ruling that is still pending from the United States Supreme Court.