Michael Hiltzik: DoorDash thought it was smart to force workers to arbitrate, but now faces millions in fees

Michael Hiltzik: DoorDash thought it was smart to force workers to arbitrate, but now faces millions in fees

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Sergio Reyes of DoorDash takes note of the order in front of him and relays a message to the client that he is on his way.

Sergio Reyes of DoorDash takes note of the order in front of him and relays a message to the client that he is on his way. (John Gastaldo/San Diego Union-Tribune/TNS)

It's not surprising why employers often require their workers to take wage and workplace complaints to arbitration instead of court: The big companies almost always win.

Here's a case involving the gig economy company DoorDash that turns that custom on its head. The company, facing a torrent of more than 5,800 arbitration claims filed by its workers, is insisting they go to court instead.

And the workers, who customarily try to get their cases heard in court instead of an arbitrator, have moved to force DoorDash to arbitrate.

The company's goal is to avoid having to pay arbitration fees of $12 million to $20 million. But DoorDash may have no choice, since a federal judge in San Francisco just denied its motion to avert arbitration.

The workers maintain that DoorDash has improperly classified them as independent contractors rather than employees.

Federal Judge William Alsup of San Francisco plainly suspected that DoorDash wielded the arbitration agreements signed by its workers as weapons to discourage the workers from filing claims.

His suspicions were aroused when the company, facing thousands of arbitration claims, refused to pay its share of the filing fees. That prompted the arbitration agency, the American Arbitration Association, to cancel all the arbitration cases.

For decades, Alsup observed in a blistering order issued Monday, employers have forced arbitration clauses upon their workers. "DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost," he wrote.

Instead, Doordash is trying to force the workers to sue it in court, a much more costly and burdensome process. "Irony upon irony," Alsup wrote, in ordering the arbitrations to proceed. "This hypocrisy will not be blessed, at least by this order."

Travis Lenkner, an attorney for the workers, called Alsup's ruling "a significant ruling for individuals who are forced to sign arbitration clauses as a condition of performing work. Companies can't prohibit class actions and require workers to engage in individual arbitration, only to refuse to arbitrate with workers who demand it."

DoorDash's attorney on the case, James P. Fogelman of Gibson Dunn, didn't respond to a request for comment.

Consider the background of this juridical man-bites-dog story.

As we've reported before, arbitration can be an inexpensive and efficient means of resolving disputes when all the parties come to the table with equivalent standing - two businesses jousting with each other, for instance.

When it's used by employers against employees, or by corporations against aggrieved customers, and when it's forced down complainants' throats against their wishes, however, it's a scourge.

President Obama recognized that in 2014, when he outlawed arbitration in workplace discrimination, sexual assault or sexual harassment cases brought against federal contractors.

Arbitration typically favors the bigger parties - they know their way around the process better, and they can take better advantage of what are often very loose standards of evidence and testimony in arbitration.

Like many other employers, DoorDash stuck an arbitration requirements into its contract with its couriers, whom it calls "Dashers." These are individuals who deliver food orders placed by the gig company's customers from local restaurants.

The contracts at issue in the case before Alsup said that the company and the workers "mutually" agreed to bring all disputes to arbitration, including disputes over whether the workers were properly classified as independent contractors.

According to the contract, both parties - company and worker - were barred from bringing their dispute to court or resorting to class action filings. The pact required workers to pay a filing fee of $300 to bring an arbitration case, and DoorDash to pay $1,900.

Starting last March, workers represented by the Chicago law firm Keller Lenkner took DoorDash at its word. The first tranche of 3,000 claims would have obligated DoorDash to pay more than $20 million in filing and administrative fees and arbitrators' retainers, according to the company's law firm, Gibson Dunn. In time, some 6,000 arbitration claims were filed against the company.

DoorDash has contended that this was all part of a "shakedown scheme" by Keller Lenkner, since the Chicago firm simultaneously offered to negotiate a non-arbitration settlement.

The company eventually claimed that there was no proof that more than 800 of the claimants had actually agreed to the arbitration clause, and they were dropped from the litigation. But there's no dispute that DoorDash's arbitration clause was valid for the others - by Alsup's reckoning, 5,879 couriers.

In response to the torrent of claims, Alsup determined, DoorDash simply refused to pay the administrative fees to the American Arbitration Association. As a result, on Nov. 8, the arbitration association closed the files. The workers filed a motion to compel arbitration - typically a motion filed by employers attempting to quash lawsuits.

Alsup was unimpressed by DoorDash's position. At a Nov. 25 hearing, he upbraided the company's lawyer, James P. Fogelman: "Your law firm and all the defense law firms have tried for 30 years to keep plaintiffs out of court in employment cases," he said.

"So finally somebody says: OK, we'll take you to arbitration. And suddenly it's not in your interest anymore. And now you're wiggling around trying to figure some way to squirm out of your own agreement. ... There is a lot of poetic justice here."

This isn't the first such order to come out of federal court in Northern California. On Oct. 22, U.S. Judge Sandra Brown Armstrong of Oakland found in favor of some 5,200 couriers and against Postmates, another gig company offering food delivery services.

The facts were similar to the DoorDash case - Postmates required its workers to sign arbitration agreements, then faced a flood of arbitration claims and refused to pay the fees.

Armstrong felt no more sympathy for Postmates than Alsup did for DoorDash. The workers, she wrote, were given no option other than to submit their claims that they were misclassified as independent contractors to arbitration, individually, "which is precisely what they did."

She concluded: "The possibility that Postmates now be required to submit a sizable arbitration fee ... is a direct result of the mandatory arbitration clause and class action waiver that Postmates has imposed upon each of its couriers." She ordered the cases to go to arbitration, though she left it to the arbitrators to decide whether or when to pay the arbitration fees.

And in January 2019, the fast-food company Chipotle Mexican Grill squealed for mercy before a federal judge in Colorado. In that case, Chipotle has been fighting claims of wage theft lodged in federal court by current and former workers since July 2013, with the army of plaintiffs having grown to about 10,000 strong.

The company thought it had won a major victory by persuading the judge to eject more than 2,800 of those workers from the court proceedings because they had signed an agreement to bring their claims only via arbitration.

But as a result, Chipotle could be facing thousands of individual arbitration cases spread across the country, almost all the expenses of which it may have to shoulder itself - potentially tens of thousands of dollars per case.

"We didn't ask for this," Kent Williams, a Minnesota attorney directly representing hundreds of plaintiffs, told me last year. "Chipotle asked for it." The litigation is still pending.

None of this necessarily means that employers are going to lose their taste for mandatory arbitration, especially since judges share their taste for arbitration, which keeps thousands of little cases off their own dockets. In the DoorDash and Postmates cases, the interests of the judges and the workers happened to coincide, but that may not happen all the time.

What the judges didn't like in these cases was the companies' trying to renege on their own contracts.

"Other companies facing arbitration demands should see the writing on the wall," Lenkner says. "Courts are not going to let them get away with creating a 'heads we win, tails you lose' situation that prevents individual workers or customers from pursuing their claims."

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