An old fable cautions to be careful what one wishes for. Such is the case for DoorDash. The company now has to pay $12 million in filing fees alone, to resolve the 6,000 arbitration claims by its drivers, who argue they were misclassified as contractors, but were rather employees. For a start-up that is still burning through cash, the expense is more than painful. The employee bar is amused; the employer bar concerned. However, there is another lesson here, one that involves online dispute resolution.
For decades employers have insisted that their employees or quasi-employee contractors (think Uber drivers) sign individual arbitration clauses. As a result, an employee wouldn’t be able to go to court or to participate in a class action. Instead, he must resort to a private arbitration administered by a private company. The idea of arbitration is having a neutral third-party resolve a dispute in the same judicial manner, but without the usual formalities, expenses, and length of the judicial process. The critics point out that the arbitration companies, which are private, depend on employers, who pay the costs, as repeat customers. At the very least, they argue that there is appearance of bias. The arbitrations are also confidential and usually lack the discovery process, making it more difficult for individual employees to uncover unlawful conduct. Or, as the employer advocates put it, these are the safeguards that discourage baseless claims and ensure simplicity and speed. The debate has, so far, been resolved in the employers’ favor; the courts routinely enforce such clauses.
The judge decided that DoorDash, which carefully designed the arbitration clause at issue, will not be heard to complain about its wishes being granted. This area of law will undoubtedly continue to develop as more courts are invited to weigh in.
Whatever the final outcome, the DoorDash cases present ready opportunities for online dispute resolution. The term “online dispute resolution” is extremely open-ended. A hearing conducted via Zoom is an example of online dispute resolution. But so is the Ebay process for automatically resolving the unpaid item disputes by ruling in favor of the buyer on all first-time offenses. In other words, any online tool that helps resolving a dispute is a part of the so-called online dispute resolution process. With that in mind, let us explore two examples using DoorDash as a hypothetical.
First, online process is uniquely suited to resolving small claims. The number of claims and the history of the DoorDash dispute indicate that most of the claims at issue probably fall below the threshold. FairClaims, the company I’ve had the honor of working with as an arbitrator on over 70 matters, presents a good case study. The process is, indeed, fast, and mimics a small claims hearing in court. There are also vast improvements. The administrative portion is easy and mostly automated. The parties submit their evidence through an online platform, which is highly intuitive. The scheduling is performed online through a built-in calendar tool. The hearing can take place via telephone or video. It is worth noting that unlike most regular small claims hearings, which take 15 minutes or less, the hearings via the online process is at least 30 minutes long. The entire process takes approximately 30 days or less. No travel is involved. A hearing can take place outside of the regular business hours, which are inconvenient for most parties. Finally, the filing fee is substantially lower than that charged by the traditional providers. In all, online dispute resolution is the clear winner in handling cases with lower value at a greater volume.
Second, from the companies’ perspective, employee claims of this nature present an obvious opportunity for automation or semi-automation in terms of risk-assessment, settlement, and formulating a defense. For instance, I represented employers defending claims for unpaid overtime, vacations, wages, and all sorts of other employee compensation. In most cases, once the companies dug into their records, the amounts at issue were fairly trivial. Understanding the claims led to speedier resolution, through settlement, summary judgment, or simply accepting liability for a $500 claim, rather than spending infinitely larger amounts in defense.
In the DoorDash case, plaintiffs are likely to ask for compensation tied to the trips they performed. For example, they may claim that DoorDash didn’t pay the minimum wage for the services provided under the local laws. Or, perhaps, the plaintiffs could claim overtime rates. Or paid sick leave and similar compensation. The plaintiffs are frequently unaware of the true extent of their damages and claim the need to rely on the employer for the information. Online tools would make such information readily available.
The basics of the DoorDash operation are simple. A courier uses a phone to accept an order for delivery. The phone then directs them to the pick-up and drop-off locations via GPS. The entire trip is, of course, recorded. DoorDash can thus evaluate any claim simply by pulling up a driver’s delivery record, which would contain information about all the trips taken, the dates, the duration of the same, and all payments made to the driver. Based on that information, it is fairly easy to calculate a number of scenarios, such as whether the plaintiff received the minimum wage, what the difference was, and so on. This, in turn, would present an opportunity for intelligent claim assessment, meaningful mediation, and settlement. Given the speed of technology, these operations can be performed instantaneously. The company can then make an intelligent decision about the claims. It also benefits the claimants by providing them with a transparent and verifiable valuation of the claim. It might even turn out they were paid in full.
This area of the law practice is developing; the results will undoubtedly surprise us. Stay tuned.