DoorDash — like many other “gig-economy” companies — includes an individual arbitration clause in the contracts that delivery drivers must sign to start work. These clauses state that drivers, known as Dashers, must go to arbitration, not court, if they have a legal dispute with the company. They also preclude Dashers from combining their claims before an arbitrator. This increasingly common condition of employment becomes a problem when low-wage workers’ individual claims are not worth as much money as they would cost to arbitrate. An employer that, say, fails to pay reimbursements required under state law might owe multiple employees a few thousand dollars each. That’s a significant sum for most individuals, but few lawyers would be willing to take on such a case on behalf of just one worker. So by eliminating class actions, companies can effectively use individual arbitration clauses to make workers’ claims against them disappear.
That is, unless workers decide to call their employer’s bluff, as more than 5,000 Dashers did last year. The coordinated demand for individual arbitration prompted the firm that DoorDash chose to handle its arbitrations to bill the company for nearly $12 million in fees.
DoorDash refused to pay up, so Dashers went to court to enforce their arbitration agreements. The company responded in a later court filing that the workers’ law firm was attempting a “shakedown scheme” and had “no intention, nor the practical ability” to proceed with thousands of arbitrations simultaneously. DoorDash posited that the plaintiffs intended to use the company’s contractual obligation to pay arbitration filing fees as leverage to seek a settlement.
The problem, as U.S. District Judge William Alsup discerned, is that if individual arbitrations are economically unfeasible and mass arbitrations are illegitimate, then only companies, not workers, can use the economics of individual arbitration to their advantage.
In a striking opinion, Alsup wrote that “the workers wish to enforce the very provisions forced on them” and use “the remnant of procedural rights left to them.” In other words, a business that imposes individual arbitration on its workforce must accept the risk that it might have to honor its end of the bargain.
A civil-justice system in which most low-wage workers cannot, as a practical matter, enforce their rights in court or in arbitration hardly deserves its name. The DoorDash workers’ creative strategy — one also pursued by thousands of Lyft and Uber drivers in 2018 — is a way for workers to reclaim some leverage in a legal environment that employers shape to their own benefit. But efforts to harness the power of numbers and the upfront costs of arbitration are not a comprehensive solution. For starters, filing for arbitration can be burdensome and expensive. DoorDash workers’ share of arbitration filing fees was $300 each, or $1.2 million total, according to the ruling. By contrast, the fee to file a class-action complaint in federal court is $400.
Even when workers can afford to attempt a strategy of mass filings, they might find that firms that conduct arbitrations cannot readily supply hundreds or thousands of arbitrators at once. This means the Dashers might wait years for their cases to go forward, unless they reach a settlement with DoorDash first. (DoorDash sought to stay the case until it reaches a settlement in a separate class-action case, a request Alsup rejected.) A recent study by the liberal-leaning Economic Policy Institute estimated that about 55 percent of non-union private-sector workers are subject to individual arbitration clauses. This translates to millions of employees who are required to resolve their workplace disputes in a system that lacks the infrastructure to do so.
Companies that impose individual arbitration clauses on workers neither want nor expect to arbitrate their disputes. Instead, as the DoorDash case suggests, businesses expect that low-wage workers will not enforce their rights in any forum. Work-arounds such as the mass-arbitration strategy are satisfying when they produce an outcome such as Monday’s court order, but those results probably are not scalable. A more sustainable solution would be for Congress to bar employers from unilaterally imposing individual arbitration on their workforces. The Protecting the Right to Organize Act, passed by the House this month, would invalidate pre-dispute individual arbitration agreements for employees. It also strengthens employees’ rights to act collectively, including by banding together to enforce their rights in class or collective actions.