In a trend becoming increasingly more common among gig economy companies, Uber opted to use legal arbitration to confront complaints by drivers over compensation. This strategy hoped to both avoid potentially costly litigation for both sides and deter more drivers from coming forward with complaints.
However, as Uber prepares to go public, 60,000 Uber drivers across the country have now filed arbitration demands against the company. These demands essentially complain about or dispute the amount of compensation earned by drivers.
Benefits of utilizing individual arbitration in employment disputes
Based on a ruling in California’s highest court in 2018, Insurance Journal states that many legal experts agree that Uber drivers do qualify as employees, although the company treats them as independent contractors. With this, Uber must consider paying its drivers benefits in addition to their compensation, which could factor in to the shockingly high number of arbitration demands.
Arbitration has its pros and cons for both employers and employees, although the advantages often stack in favor of the employer. However, benefits for employees can include:
- A private setting to resolve a dispute
- Often reduced costs in avoiding a costly court battle
- The potential to resolve the dispute quicker than in litigation
However, the disadvantages can outweigh these benefits. In many employment disputes, the opinion of a judge and jury can be helpful. According to The Balance, with no formal evidence process, deposition or discovery process, the decision falls on the background and judgment of the chosen arbitrator.
Additionally, as many employers include arbitration clauses in employment agreements, it can seem as if the employer holds more power from the start by deciding how a future dispute will be confronted and resolved. This also prevents drivers from banding together in a class-action lawsuit.
A changing power dynamic between Uber and its drivers
While forced arbitration clauses often favor the employer, in Uber’s case, the company may have lost its bargaining power with the sheer number of arbitration demands it now faces. The company has avoided the risk of class-action litigation, yet now faces enough arbitration demands to spend years and millions of dollars on.
Uber had originally counted on its drivers wanting to bypass a painstaking individual legal process to address their complaints. However, this seems to have backfired. Gig economy companies may begin to reassess their strategy to addressing disputes, which could benefit their employees.