How Deep Can Apps Bury an Arbitration Clause?

By George Khoury, Esq. on November 19, 2018 | Last updated on March 21, 2019

A recent first circuit appeal is testing just how buried an arbitration clause can be in an employment or services agreement.

The case involves a Lyft driver who is arguing that because the arbitration clause was buried in the fine print of the terms of service presented to him on his smartphone via the company's app, it's unconscionable to require him to arbitrate. And while that logic might be sound, courts have routinely dismissed this same sort of argument in favor of enforcing arbitration. In short, people are expected to read the terms of service, despite the fact that it is common knowledge that no one does.

How Buried Can It Be?

Arbitration clauses may be falling out of fashion, but if money is more important than your company's social media reputation, using arbitration clauses for all your agreements might just be good business. It works for Airbnb, who regularly gets complaints against it dismissed thanks to its buried arbitration clause.

Last year, Uber won an appeal covering a similar arbitration issue, though the facts of the underlying case were, let's just say, a little different. But in the end, the Second Circuit agreed with the rideshare company that the user and plaintiff was bound by the arbitration clause buried in the terms of service.

If what you offer is something people want, there's simply no need to bury an arbitration clause. For those companies that ask app users to agree to terms of service, it might be worthwhile to highlight their arbitration provision, or require just one additional tap to specifically agree to it.

After all, if people are just going to click through in order to get to the service, it's unlikely that the one additional click will stop them, and it will simply undercut any potential for an argument that the clause was buried.

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