Fifth Circuit Orders Independent Contractor to Individually Arbitrate FLSA Claims

The United States Court of Appeals for the Fifth Circuit has affirmed a district court’s order compelling an independent contractor to arbitrate his Fair Labor Standards Act (“FLSA”) claims against a restaurant food delivery service.  In Edwards v. DoorDash, Inc., No. 17-20082 (5^th Cir., April 25, 2018), a California-based company, DoorDash, utilized independent contractors called “Dashers” to deliver food from various restaurants to customers in hundreds of cities.  Prior to becoming an independent contractor, DoorDash required each Dasher to sign an independent contractor agreement (“ICA”) stating all disputes with the company must be decided through binding arbitration.

A Texas man, Edwards, signed the DoorDash ICA and became a Dasher.  Later, Edwards filed a proposed class action lawsuit in the Southern District of Texas alleging the company violated the FLSA.  DoorDash responded to the man’s complaint by filing a motion to compel the dispute to individual arbitration based on the terms of the signed ICA.  The company also filed a motion to dismiss the case.

Next, the district court referred the lawsuit to a magistrate judge who found it unnecessary to reach the proposed class action question after first considering the issue of arbitrability.  The magistrate judge recommended “that the motion to dismiss should be granted and Edwards should be compelled to arbitrate his claims.” The Southern District of Texas agreed with the magistrate judge and Edwards filed an interlocutory appeal with the nation’s Fifth Circuit Court of Appeals.

In the court’s written opinion, the Fifth Circuit first stated the appeal was not interlocutory in nature.  Instead, the court found that the lower court’s decision was final.  Because of this, the Fifth Circuit ruled that its jurisdiction was proper under 9 U.S.C. Section 16(a)(3).

The court then turned to Edwards’ claim that the Southern District of Texas committed error when it decided the issue of arbitrability prior to considering his request to certify a class.  After stating the court would reach the same result regardless of which proffered standard of review was used, the Fifth Circuit relied on its 2016 decision in Reyna v. Int’l Bank of Commerce to “hold that arbitrability is a ‘threshold question’ to be determined ‘at the outset,’ a holding consistent with the ‘national policy favoring arbitration.’”

The appellate court next examined Edwards’ assertion that the district court “erred in enforcing the arbitration agreement.”  According to the Edwards, the agreement to arbitrate “is unconscionable; the class waiver contained within it is unenforceable; and the ICA containing the arbitration agreement is illusory and lacked consideration.” DoorDash responded by stating once the Fifth Circuit determines there is a valid delegation clause, the court’s “proper inquiry ends and the order granting the motion to compel arbitration and dismiss should be affirmed.”

The appellate court held:

Here, the ICA contained an agreement to arbitrate, which, through incorporation of the AAA rules, contained an agreement to delegate issues of arbitrability to the arbitrator. Because DoorDash sought to compel arbitration on the basis of that delegation clause, we must treat it as valid absent any specific challenge to the delegation clause by Edwards. Edwards’s unconscionability arguments target the ICA as a whole and the arbitration agreement, but he fails to challenge the delegation clause. Therefore, we treat the delegation clause as valid. Edwards’s remaining arguments regarding the validity of the arbitration agreement or the ICA as a whole should be addressed by the arbitrator.

Finally, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s order dismissing Edwards’ lawsuit and compelling him to individually arbitrate his claims.

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