In a recent ruling from the Ninth Circuit Court of Appeals, a dispute involving Amazon Flex drivers and their off-hours conversations monitored by Amazon on closed Facebook groups has provided significant insights into how companies should draft and revise their terms of service agreements (TOS) and arbitration clauses. The case underscores the essentiality of giving adequate notice of changes to TOS and the arbitration clauses contained within them.
Background
The drivers alleged that Amazon violated their privacy under both state and federal laws by monitoring and wiretapping their off-hours conversations in closed Facebook groups. Amazon retorted that the dispute should be sent to arbitration, citing a broad arbitration clause in their 2019 TOS. The main plaintiff countered that the 2016 TOS should apply, asserting that he had never received notice of the revised 2019 TOS. The parties agreed that if the 2016 TOS were applicable, then the court had the authority to decide whether the dispute is subject to arbitration and whether Amazon’s motion to compel arbitration should be granted.
Ninth Circuit Decision
The Ninth Circuit agreed with the district court that the 2016 TOS applied and that the parties’ dispute was outside the scope of the 2016 TOS’s arbitration clause. Amazon, as the party seeking arbitration, had the burden to prove that it provided adequate notice of the 2019 TOS and that there was mutual assent to the arbitration agreement contained therein. This decision was consistent with California law and principles of contract law.
The 2016 TOS arbitration clause stated that it applied to “any dispute or claim … arising out of or relating in any way to this Agreement, including … participation in the program or … performance of services.” However, the Court observed that none of the drivers’ claims depended upon the terms of the contract that contained the arbitration clause. The Court acknowledged that the plaintiff likely joined the Facebook groups because he was an Amazon Flex driver, but any non-driver (e.g., driver spouses, union organizers) who happened to be in the same group could likely assert the same privacy-related claims against Amazon independent of the TOS. Therefore, the Court held that the drivers’ claims did not fall within the scope of the 2016 TOS’s arbitration clause.
Amazon claimed that it circulated the 2019 TOS to its Flex drivers via email and that, even if it had not, by accepting the 2016 TOS, its drivers had agreed to be bound by new terms so long as they continued to perform delivery services for Amazon or access the Flex app after receiving notice of the updated terms. But the Court concluded that there was no mutual assent to the 2019 TOS as Amazon did not provide the court with a copy or description of the notice it claimed it delivered, nor did it show that the driver had received such notice. Consequently, only the 2016 TOS could apply.
Lessons for Companies
This case offers two key lessons for companies that seek to keep all disputes with contractors, customers, and other counterparties in arbitration rather than allow some to be adjudicated in court.
- Revisit arbitration provisions: Companies should regularly review their arbitration provisions to ensure they are broad enough to cover all potential disputes.
- Provide notice of updates: Companies must provide notice of updates to applicable TOS and keep records of how they have provided such notice. In this case, Amazon’s failure to prove that it had given adequate notice of the updated TOS was a crucial factor in the Court’s decision.
Companies must remember that the consent of both parties is essential inthe arbitration context. Ensuring that all parties involved are aware of and agree to the terms of service, including any changes, is not only a matter of fairness but also a legal necessity. The requirement for mutual assent helps to ensure that parties are not coerced into arbitrating claims when they have not assented to do so.
The Amazon Flex case serves as a powerful reminder of these principles, providing a critical lesson for businesses in how they handle their TOS and arbitration clauses. By incorporating these insights, companies can better protect their interests and maintain stronger relationships with contractors, customers, and other counterparties.
FAQ About TOS Issues Raised by the Amazon Flex Case
What is the significance of the Amazon Flex case in terms of TOS and arbitration clauses?
The Amazon Flex case highlights the importance of giving adequate notice of changes to terms of service (TOS) and the arbitration clauses contained within them. The Ninth Circuit Court ruled that the arbitration clause in the 2016 TOS applied in this case, not the 2019 TOS, as Amazon failed to provide adequate notice of the changes to the drivers.
What lessons can companies learn from this case regarding their own TOS?
There are two key takeaways for companies. First, they should revisit their arbitration provisions regularly to ensure they cover all potential disputes. Second, they must provide notice of updates to their TOS and keep records of how they have provided such notice.
How does the concept of ‘mutual assent’ apply in this case?
In the context of the Amazon Flex case, ‘mutual assent’ refers to the agreement between Amazon and the drivers about the terms of service. The Court concluded there was no mutual assent to the 2019 TOS because Amazon did not provide adequate notice of the updated terms to the drivers.
How did the Court determine that the dispute was outside the scope of the 2016 TOS’s arbitration clause?
The Court noted that none of the drivers’ claims depended on the terms of the contract that contained the arbitration clause. Furthermore, it was observed that other non-drivers (e.g., driver spouses, union organizers) who happened to be in the same Facebook groups could likely assert the same privacy-related claims against Amazon independent of the TOS. As a result, the Court held that the drivers’ claims did not fall within the scope of the 2016 TOS’s arbitration clause.
How does this case impact the way companies should handle privacy-related claims?
While the case doesn’t directly set a precedent for handling privacy-related claims, it does underscore the importance of clearly defining the scope of TOS and arbitration clauses. Companies should ensure that their TOS adequately cover all possible disputes, including those related to privacy, and that any changes to these terms are properly communicated to all parties involved.
What is an arbitration clause and why is it important in a TOS?
An arbitration clause is a section in a contract that requires the parties to resolve their disputes through an arbitration process. This typically means that disputes will be settled outside of court, often resulting in a quicker and less costly resolution. In the context of a TOS, an arbitration clause can help to streamline dispute resolution between a company and its users or contractors.
Does a company always have to provide notice when it updates its TOS?
While the specific requirements can vary based on jurisdiction and the nature of the agreement, it’s generally considered good practice for a company to provide notice when it updates its TOS. As seen in the Amazon Flex case, failure to provide adequate notice can lead to complications in enforcing the updated terms.
What constitutes ‘adequate notice’ when updating a TOS?
‘Adequate notice’ typically means that the company has taken reasonable steps to inform the relevant parties of the changes to the TOS. This can include sending an email, displaying a notification on an app or website, or other methods of communication. The goal is to ensure that parties have a reasonable opportunity to review and understand the changes before they continue using the service.
If a dispute falls outside of the scope of a TOS’s arbitration clause, what happens?
If a dispute falls outside of the scope of a TOS’s arbitration clause, it typically means that the dispute can be taken to court instead of being resolved through arbitration. This was the case in the Amazon Flex situation, where the drivers’ claims were found to be outside of the scope of the 2016 TOS’s arbitration clause and therefore could proceed in court.
What can other non-driver entities learn from this case?
The Amazon Flex case provides valuable insights for any entity that enters into contracts with terms of service and arbitration clauses. The key takeaway is the importance of providing clear, adequate notice of any changes to these terms, and ensuring that arbitration clauses are broad enough to cover all potential disputes. This applies not only to companies and their contractors or customers, but also to entities like unions, who may interact with companies on behalf of workers.
How can a company ensure its TOS arbitration clause covers all possible disputes?
A company can consult with legal counsel to draft a comprehensive and broad arbitration clause. This clause should clearly state that it applies to all disputes arising out of or relating to the TOS, the use of the company’s services, or the relationship between the user and the company. The clause should also specify that the arbitrator, not a court, has the authority to decide whether a claim is subject to arbitration.
What role does the court play in determining whether a dispute is subject to arbitration?
If there is a dispute about whether an issue is subject to arbitration, the court may be asked to make a determination. This often involves interpreting the language of the arbitration clause and applying relevant laws and precedents. However, if the arbitration clause expressly states that the arbitrator has the authority to decide whether a claim is subject to arbitration, then the court will usually defer to the arbitrator’s decision.
Why did Amazon argue that the 2019 TOS applied even though the driver claimed he didn’t receive notice of it?
Amazon argued that the 2019 TOS applied because it believed it had provided notice to its Flex drivers via email. Additionally, the 2016 TOS stated that drivers agreed to be bound by new terms so long as they continued to perform delivery services for Amazon or access the Flex app after receiving notice of the updated terms. However, the court ruled that Amazon failed to provide adequate proof of this notice.
Can a company change its TOS without notifying its users or contractors?
In general, changes to a TOS should be communicated to users or contractors, and companies should strive to obtain explicit consent to these changes where possible. As demonstrated in the Amazon Flex case, failing to provide notice of changes to a TOS can lead to complications in enforcing the updated terms.
How can a company provide evidence of having given notice of TOS updates?
A company can keep records of how and when notice was provided. This could include keeping a copy of the email sent to users or contractors, recording when a notification was displayed on the app or website, or keeping server logs showing that the user accessed the app or website after the notification was displayed. In the event of a dispute, these records can serve as evidence that notice was provided.
Disclaimer: This blog post is meant for informational purposes only and does not constitute legal advice. Readers should consult with a legal professional before making any decisions based on the information provided
