Delivery Co. Must Pay $10M In Arbitration Fees in Postmates Workers Dispute

The 9th Circuit ordered Postmates to pay $10 million in fees to cover arbitration proceedings with more than 5,000 of its independent contractors who say they were underpaid.

Postmates workers say they have faced unfair treatment from the company, especially in light of the importance of delivery service during the COVID-19 pandemic.

Workers claim Postmates has shorted them on mileage payments, as well as failing to provide masks and hand sanitizer.

Indeed, a San Francisco Postmates worker filed a class action lawsuit on behalf of himself and other independent contractors.

Postmates, however, includes a “Class Action Waiver” in its independent contractor agreements.

Many companies that use independent contractors use these or similar waivers to avoid class action lawsuits filed by workers. Instead, the companies force workers to agree to resolve most disputes using arbitration. Additionally, workers are often compelled to agree to resolve disputes on an individual basis as part of their independent contractor agreement.

Arbitration agreements have since been deemed permissible by the U.S. Supreme Court in a 2018 decision that allowed a company to require workers to resolve their disputes out of court.

Postmates workers took a different tack regarding the arbitration clause in their independent contracting agreement: Instead of fighting the arbitration clause, workers are using “mass arbitration lawsuits.”

How ‘Mass Arbitration Lawsuits’ Work

Arbitration is an alternative dispute resolution process that takes care of legal disputes outside of the court system.

In an arbitration proceeding, an arbitrator will hear from both of the parties, along with evidence, and resolve the dispute. Though there are rules, they are less strict in an arbitration proceeding.

Companies like Postmates tout their arbitration clauses, such as the “Class Action Waiver” in their independent contractor agreement, as a way to quickly and cheaply resolve worker disputes; however, critics say forcing workers to arbitration rather than allowing them to band together in a class action lawsuit is unfair and leaves independent contractors at a disadvantage.

Postmates workers may have found a way to make the “Class Action Waiver” in Postmates’ independent contractor agreement work to their advantage, however.

Reportedly, approximately 5,200 Postmates workers are attempting to independently arbitrate their pay dispute with the company at the same time. Under the terms of Postmates’ independent contractor agreement, the company must cover filing fees in each arbitration case, amounting to millions of dollars for the company.

As a result, in 2019, the company reportedly asked a California federal court to help them escape paying millions of dollars in filing fees to the American Arbitration Association (AAA). Postmates reportedly offered to pay fees in 50 of the cases; however, the AAA refused and closed more than 2,000 case files.

The Postmates workers reportedly took the dispute over arbitration fees to a California federal court, alleging that the company was in breach of their independent contractor agreement by failing to pay the fees to initiate the arbitration proceedings. They also asked the judge to hold Postmates in contempt for failure to pay the fees.

The California federal court judge agreed with the Postmates workers and ordered the company to pay the arbitration fees. Postmates appealed the decision to the 9th Circuit.

The 9th Circuit also came down on the side of the Postmates workers.

Postmates argued that its own “Class Action Waiver” clause in their independent contractor agreement should not apply to the workers’ dispute, specifically the payment of arbitration fees; however, the 9th Circuit rejected Postmates’ reasoning, finding that the company must face its workers’ claims in arbitration — and pay $10 million in arbitration fees to do so.

Do the Lawyers Get Paid in Arbitration Proceedings?

Though arbitration is an alternative to court proceedings, parties can and, in some cases, should consider legal representation.

Lawyers do a tremendous amount of work in arbitration cases and can be awarded attorneys’ fees as a part the arbitrator’s final decision. In some cases, lawyers need to be sure to ask for arbitration fees as a part of the proceeding.

Under the American Arbitration Association’s Commercial Arbitration Rules, the award determined by the arbitrator can include “an award of attorneys’ fees if all parties have requested such an award … .” If the party obligated to pay attorneys’ fees refuses to do so, the arbitrator’s decision can be taken to court and converted into an enforceable judgment against that party.

Are you a Postmates worker? What do you think of the dispute and arbitration agreement Postmates uses with its independent contractors? Tell us in the comment section below.

The independent contractors are represented by Ashley Keller, Travis Lenkner and Warren Postman of Keller Lenkner LLC.

The Postmates Workers Arbitration Lawsuit is Adams, et al. v. Postmates Inc., Case No. 19-17362, in the U.S. Court of Appeals for the 9th Circuit.

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