A gig worker who cleaned houses through an online service provider that allegedly misclassified her as an independent contractor was bound by a “clickwrap” mandatory arbitration agreement, the 1st U.S. Circuit Court of Appeals has ruled.
Later, using Handy’s mobile app on her smartphone, she clicked an “Accept” button on a screen that displayed the first few sentences of Handy’s independent contractor agreement, as required in order to be connected with customers.
The agreement included a mandatory arbitration clause as section 12, though that portion was not immediately visible on the screen in question. The plaintiff apparently did not scroll through the entire 15-section agreement, which the app permitted but did not require.
The plaintiff later brought a putative class action alleging Handy misclassified her and others as independent contractors, resulting in violations of the state Wage Act and the federal Fair Labor Standards Act.
When Handy moved to compel arbitration, the plaintiff argued that she did not have sufficient notice of the arbitration clause to be bound by it.
But the 1st Circuit disagreed, applying the standard the Massachusetts Supreme Judicial Court articulated earlier this year in Kauders v. Uber Technologies, Inc.
Kauders states that an online contract is formed under Massachusetts law when the user has “reasonable notice” of the terms and has made a “reasonable manifestation of assent” to those terms.
“[T]he screen displaying the portion of the Agreement that was plainly visible before Emmanuel selected ‘Accept’ made clear that additional text further specifying the terms of the Agreement could be viewed by scrolling,” Judge David J. Barron wrote for the panel.
Additionally, Barron continued, “[i]nsofar as Emmanuel contends that, per Kauders, she did not receive reasonable notice of the mandatory arbitration provision due to the ‘nature’ or the ‘size’ of the online ‘transaction’ at issue, … we also cannot agree.”
The 23-page decision is Emmanuel v. Handy Technologies, Inc.
Endorsing a fiction?
Plaintiff’s counsel Shannon E. Liss-Riordan of Boston said she was “very disappointed” with the ruling, adding that rigid enforcement of arbitration agreements in cases like Emmanuel has made it nearly impossible to enforce wage and consumer protection laws.
“We’re not just talking about some debatable, minor violations, but entire industries have used arbitration clauses to shield themselves from even having to provide the most basic worker protections,” she said. “The courts have gone down a rabbit hole that Congress never intended when it passed the [Federal Arbitration Act] in 1925. The current Congress really needs to fix this.”
Handy’s attorney, Michael Mankes of Boston, declined to comment.
However, management attorney James W. Bucking of Boston said the decision made sense.
“Increasingly, more and more agreements are being done on the internet as opposed to a piece of paper, and the court is establishing a similar rule,” he said. “If a company handed you a 10-page agreement with a signature line on the last page and you skipped to that page and signed, it would be enforceable. The rule here is the same. If you know that what you’re signing is an agreement, it’s up to you whether you read it — but it’s going to be enforced.”
Travis J. Jacobs of Boston observed that while Kauders may appear contradictory on the surface, Handy used much more comprehensive processes and procedures to ensure consent.
The SJC in Kauders found that Uber users were not given reasonable notice of an arbitration provision in the rideshare service’s customer agreement.
“In the Handy Tech case, you had a company that clearly received good legal counsel not only in drafting the agreement … but in customizing and setting up the disclosures and procedures for downloading, accessing and using the mobile application,” Jacobs said. “It’s really quite amazing that a company with as many resources as Uber failed to implement the kind of processes and procedures that helped Handy Tech win the day.”
“This is helpful guidance to organizations drafting arbitration agreements for workers because it confirms that individuals performing services for compensation will continue to be treated as competent and rational actors, and organizations do not need to go to extraordinary lengths to simplify provisions or emphasize important points in a contract in order for it to be binding.”
— Barry J. Miller, Boston
Boston attorney Barry J. Miller said the two decisions illustrate that arbitration agreements in the employment/independent contractor context are not given the same scrutiny in terms of contract formation as similar agreements in the consumer context.
“This is helpful guidance to organizations drafting arbitration agreements for workers because it confirms that individuals performing services for compensation will continue to be treated as competent and rational actors, and organizations do not need to go to extraordinary lengths to simplify provisions or emphasize important points in a contract in order for it to be binding,” Miller said.
On the other hand, plaintiffs’ attorney Matthew J. Fogelman of Newton Center, Massachusetts, said he thought the court “glossed over” the fact that the user was expected to scroll through a lengthy, dense agreement on a phone.
“It’s one thing to hand someone a six-page hard copy document where they’re flipping from one page to the next. But it seems like a stretch to expect that the typical worker, especially one in a low-wage setting, is going to scroll and scroll through something on their phone that has 20 paragraphs,” Fogelman said. “It seems like a large national company is taking advantage of unsuspecting low-wage workers. … This isn’t a C-suite executive negotiating an employment agreement. It’s just not an equal playing field.”
In May 2015, the plaintiff accessed Handy’s website and completed a form titled “Home Cleaner Application.”
When the plaintiff first accessed the app, she encountered a screen with a number of terms, including an acknowledgement that she was an independent contractor responsible for all costs and expenses, and she had to click a “Confirm” button to proceed.
After doing so, she encountered a second screen instructing her to accept the independent contractor agreement. The first few sentences of the agreement were visible on the screen with an “Accept” button at the bottom. The user could scroll through the agreement, which contained a mandatory arbitration provision at section 12 of 15, before clicking “Accept,” but the plaintiff did not do so.
The plaintiff ended up performing between 10 and 20 jobs through Handy but stopped because of payment issues.
In July 2015, the plaintiff filed a purported class action in U.S. District Court alleging FLSA and Wage Act violations, asserting that she was misclassified as an independent contractor, which resulted in Handy denying her a minimum wage while forcing her to bear her own expenses.
Handy moved to dismiss and compel arbitration, citing the mandatory arbitration agreement that it claimed she accepted at least three separate times.
The plaintiff argued in response that, under Massachusetts law, she had not in fact entered the agreement, and that even if she had, it was void for unconscionability.
Judge Nathaniel M. Gorton ruled for Handy, and the plaintiff appealed.
Addressing the plaintiff’s appeal, the 1st Circuit conceded that only a portion of the agreement was automatically visible on her screen before she selected “Accept” and that the app did not require her to scroll through the agreement in its entirety first.
Still, Barron said, the screen showing that portion of the agreement made it clear that she could view the rest of the agreement by scrolling.
“Emmanuel … cannot succeed in arguing that she was not provided with ‘reasonable notice’ of the arbitration provision because she chose not to review it despite having had an adequate opportunity to do so,” Barron said. “Kauders makes clear that a party may be ‘bound by [the] terms of [a] contract regardless of whether [the] party actually read [the] terms.’”
Because the plaintiff had reasonable notice of the agreement and its terms, the 1st Circuit concluded, the arbitration provision was enforceable.
As to the plaintiff’s unconscionability argument, the court said that was a matter for the arbitrator to decide.