Jaswinder Singh filed a putative class action against Uber Technologies, Inc. (Uber) in New Jersey Superior Court, arguing that the Uber employment contract improperly classified plaintiff and other drivers as independent contractors rather than employees, and that they were entitled to overtime and reimbursement of certain business expenses. Uber removed the case to federal court and then moved the court to dismiss the case and compel arbitration pursuant to the arbitration clause in the relevant employment contract. Singh opposed the motion, arguing that he and other drivers fell within § 1 of the Federal Arbitration Act (FAA) that exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (commonly referred to as the FAA’s “residual clause”) from compelled arbitration of employment disputes. Singh further argued that he should be given the opportunity to conduct discovery on whether he and other Uber drivers were “workers engaged in foreign or interstate commerce” under § 1 of the FAA.
The district court made no inquiry into whether Singh or his fellow drivers did in fact engage in interstate commerce and granted Uber’s motion, finding that § 1 of the FAA only applied to transportation workers who transport cargo, not those who transport passengers.
On September 11, 2019, in Jaswinder Singh v. Uber Technologies, Inc., the U.S. Court of Appeals for the Third Circuit vacated the district court’s decision, finding that the residual clause in § 1 of the FAA is not limited to transportation workers who transport cargo and that the residual clause may operate to exclude from FAA coverage the contracts of employment of all classes of transportation workers, so long as they are engaged in interstate commerce, or in work so closely related thereto as to be, in practical effect, a part of it. In short, the Third Circuit ruled that if Uber drivers were transportation workers within § 1 of the FAA, they could not be compelled to arbitrate their employment disputes.
In reaching this decision, the Third Circuit relied upon a recent Supreme Court decision, New Prime, Inc. v. Oliveira, 585 U.S. ___, 139 S.Ct. 532 (2019), that involved a truck driver who was seeking to avoid enforcement of the arbitration clause in his employer’s operating agreement. In New Prime, the employer moved to dismiss the lawsuit and compel arbitration on the grounds that the driver was an independent contractor, and not an employee, and therefore was not within the “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. The employer also argued that application of § 1 of the FAA should be decided by the arbitrator, and not the court. The Supreme Court disagreed, holding that the residual clause of § 1 purports to apply to the contracts of employment of “any other class of workers,” and therefore encompassed independent contractor agreements. The Court also held that a court should determine whether exclusions under § 1 of the FAA should apply before referring any dispute to arbitration.
After applying the Supreme Court’s analysis in New Prime, the Third Circuit vacated the lower court’s decision and remanded, with the direction that the district court allow limited discovery into whether plaintiff belongs to a class of transportation workers engaged in interstate commerce, or in work so closely related thereto as to be, in practical effect, part of it.