Uber has had what can best be characterized as a shitstorm of scandals in its decade-long run, and that isn’t even including any misconduct kept out of the public eye thanks to forced arbitration. Hiding those scandals appears to be turning into a costly endeavor for the ridesharing pioneer.
The legal practice in which a company forces disputes to be settled behind closed doors by a third party, rather than heard by a trial by jury is a popular tool for avoiding accountability in the tech world. Uber forces all complaints—for riders, drivers, and employees—into arbitration, with the pretty recent exception of individual claims of sexual assault. But this push to maintain its public integrity might cost the company an insane amount of money, and right before it goes public, baby.
In the prospectus that Uber filed with the SEC, it claims that more than 60,000 U.S. drivers have filed arbitration demands against the company. According to Bloomberg, that eye-popping number of legal disputes could cost the company at least $600 million. While the company is valued at nearly $84 billion, that’s still an insanely steep price to pay for an unjust labor practice. (Also keep in mind that valuation is mostly just pie-in-the-sky nonsense.) Nancy Cremins, general counsel at Globalization Partners in Boston, characterized the flood of arbitration demands to Bloomberg as “a death by a thousand cuts.” She also said that “The volume is impossible to deal with from an administrative and legal perspective.” In other words, Uber hoped to avoid a big costly lawsuit but instead, it has thousands of small, costly arbitration proceedings to wade through.
It’s a pretty spectacular self-own. Forced arbitration clauses often prohibit class-action lawsuits, but as the astonishing amount of arbitration demands against Uber illustrates, disgruntled drivers found a way to organize in a powerful way that evaded the limitations of this employment clause.
“I do think that in cases where the employer has a class-action or collective action waiver this is what plaintiffs are going to do to pursue their claims across an entire workforce,” Michael Subit, an employment attorney who has represented employee discrimination and harassment cases, told Gizmodo on Wednesday. “The US Supreme Court has left us no choice by its recent decisions but to file many, many, many arbitration demands and to process them individually.” Subit added that “the whole purpose of a collective or a class-action is to make handling of these claims more efficient by dealing with them en masse, and so employers are getting exactly what they asked for which is handling each case on an individual basis.”
The inundation of demands wasn’t totally unforeseen, though. They’ve been mounting since at least last year. Between August and November of last year, around 12,500 U.S. drivers filed arbitration demands against the company, Reuters reported in December. Of those demands, Uber had only paid the $1,500 arbitrator fee for six of the 47 appointed cases.
“I’m sure they were hoping that these collective and class-action waivers and arbitration requirements would exonerate them for potential liability,” Subit said, referring to Uber’s likely hope that people would be dissuaded from bringing claims individually. “Fortunately, that is not happening.”