By Hannah Albarazi

Law360 (May 14, 2020, 7:41 PM EDT) -- A California federal judge rejected a bid by Massachusetts Uber drivers to immediately classify them as employees eligible for paid sick leave amid the coronavirus pandemic and sent their cases to arbitration, saying Thursday the drivers aren't "engaged in interstate commerce" and aren't exempt from the Federal Arbitration Act.

U.S. District Judge Edward M. Chen's order presents a setback for Uber drivers seeking to be classified as employees entitled to paid sick leave under Massachusetts law, but the ruling echoes the decision by another California federal judge who rejected an emergency bid for injunctive relief sought by California Lyft drivers seeking the same employee classification.

"Uber drivers do not perform an integral role in a chain of interstate transportation," Judge Chen wrote, aligning with U.S. District Judge Vince Chabbria's April finding that the FAA applies to California Lyft drivers with similar claims.

Judge Chen pointed to evidence provided by Uber showing that between 2015 and 2019 only 2.5% of U.S. trips on its app started and ended in different states, and that only 0.3% of all such Massachusetts trips started and ended in different states during that time.

"The statistics cited by Uber demonstrate that interstate rides given by Uber drivers in Massachusetts [are] not only incidental — they are rare," Judge Chen wrote.

But Judge Chen and Judge Chabbria's orders conflict with the March conclusion of a Massachusetts federal judge.

U.S. District Judge Indira Talwani concluded that the Massachusetts Lyft drivers are engaged in interstate commerce, covered by the FAA's transportation worker exemption and that Lyft can't force its drivers there to arbitrate their misclassification claims. Judge Chen took over the case when it was transferred to California federal court at Uber's request.

Shannon Liss-Riordan of Lichten & Liss-Riordan PC, who represents the Massachusetts Uber drivers, told Law360 on Thursday that while they are disappointed with Judge Chen's decision, the courts are split on whether drivers fall under the transportation worker exemption to the FAA and they "look forward to continuing to pursue this argument on appeal."

"It is hard to believe that these companies can continue to evade the law and deny sick pay to their employees, even in the midst of a global pandemic, by pointing to their arbitration clause," Liss-Riordan said.

The issue of worker classification in the gig economy has reached a fever pitch, as the economic uncertainties faced by independent contractors without job security or benefits have been highlighted by the novel coronavirus pandemic and ensuing economic crisis.

Both Uber and Lyft have faced increased pressure during the pandemic from drivers seeking to be classified as employees. Drivers in California and Massachusetts have argued that the companies are putting the public at risk by misclassifying them as independent contractors — with no paid sick leave — causing drivers potentially infected with COVID-19 to keep working.

The drivers point to California's A.B. 5, enacted at the start of 2020, which codifies into law the landmark California Supreme Court decision in Dynamex Operations West v. Superior Court . The California statute requires employers to prove, among other things, that the worker performs work outside its main business in order to be classified as an independent contractor.

In his order Thursday, Judge Chen said the court understands drivers' "argument that the classification error committed by Uber has enormous public consequences, including the potential impact upon public health." 

"But thus far no court has held that such indirect consequences (even if established as a matter of fact, a matter highly controverted in view of the potential unintended consequences upon drivers' eligibility for federal benefits under the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act) render this suit one for public injunction," Judge Chen wrote.

Judge Chen said that while the California Supreme Court decision in McGill v. Citibank NA in 2017 held that arbitration agreements that waive entirely the right to pursue public injunctive relief are not enforceable, the rule does not exist in Massachusetts.

"Currently, there is no McGill rule under Massachusetts law that would prohibit arbitration of the injunctive relief that plaintiff seeks," Judge Chen writes.

Liss-Riordan told Law360, however, that "the court did not address the fact that the Massachusetts Attorney General's Office has now interpreted Massachusetts law to prohibit such a result." She said the Massachusetts attorney general filed an amicus brief agreeing with the Uber drivers' argument that Massachusetts law would not allow a claim for public injunctive relief to be thwarted by an arbitration clause.

"We look forward to pursuing this issue on appeal as well," Liss-Riordan said.

In an emailed statement Friday, Uber emphasized its commitment to "independent work."

"At a time when a record number of employees in the state of California and the country have lost their jobs, we will continue our efforts to keep independent work available to all who want it while raising the standards of that work to better meet the needs of the moment," stated Uber.

The drivers are represented by Shannon Liss-Riordan and Anne R. Kramer of Lichten & Liss-Riordan PC.

Uber is represented by Theane Evangelis, Heather Richardson and Blaine Evanson of Gibson Dunn & Crutcher LLP.

The cases are Verhines v. Uber Technologies Inc., case number 3:20-cv-01886; Colopy et al. v. Uber Technologies Inc., case number 3:19-cv-06462; and Capriole v. Uber Technologies Inc. et al., case number 3:20-cv-02211, all in the U.S. District Court for the Northern District of California.

--Editing by Bruce Goldman.

Update: This article has been updated with additional comments from the parties.

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