For Uber, using legal arbitration to deal with driver compensation complaints seemed like the smart play. It may prove to be 'a death by a thousand cuts.'
For Uber Technologies Inc., using legal arbitration to deal with driver compensation complaints — over anything from pay to overtime to mileage reimbursement — seemed like the smart play: It would preclude costly class-action litigation, it was private and few drivers would go to the trouble., in a listing that could value Uber at almost $84 billion, the number of U.S. drivers who have filed arbitration demands against Uber has swelled to more than 60,000, according to the company’s prospectus.
What Uber didn’t count on, experts said, is drivers and labor lawyers calling its bluff. Uber, especially after winning key court rulings upholding its use of arbitration, bet that drivers and their lawyers were more likely to throw in the towel than play David against the ride-hailing giant in individual arbitration cases — the legal equivalent of hand-to-hand combat against a vastly better-armed and stronger opponent.
Uber bears the lion’s share of arbitration fees, with conservative estimates of completing each arbitration at $10,000. Cremins projects the cost is closer to $20,000. Based on the number of drivers in the prospectus, that means that resolving all their arbitration proceedings would cost at least $600 million, and that doesn’t include any actual awards for drivers who win.
Uber acknowledged in its IPO filing that the already significant expense of arbitration “may become more costly for us, or the volume of arbitrations may increase and become burdensome.”“The use of arbitration provisions may subject us to certain risks to our reputation and brand, as these provisions have been the subject of increasing public scrutiny,” Uber said in the filing. To minimize such risks, it may “voluntarily limit” its use of arbitration.
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