The First Circuit Court of Appeals has held that contractual arbitration provisions of Amazon “last mile” delivery drivers in Massachusetts are not enforceable because the class action waivers in those provisions contravene Massachusetts’s public policy favoring class actions for the redress of Massachusetts Wage Act, Independent Contractor Misclassification Law, and Minimum Wage Law infractions. Waithaka v. Amazon.com, Inc., 2020 WL 4034997 (July 17, 2020).
But wait, you say, what about the Federal Arbitration Act (“FAA”) and the U.S. Supreme Court’s Concepcion and Italian Colors decisions limiting states’ ability to invalidate class action waiver provisions in arbitration clauses based on state public policy? AT & T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013). The First Circuit in Waithaka held that “last mile” delivery drivers like the plaintiff, even though they do not physically cross state lines in the course of their work, are transporting goods “within the flow of interstate of commerce,” and therefore are “transportation workers” “engaged in foreign or interstate commerce” whose contracts are exempted from the FAA’s dictates by FAA Section 1. The Supreme Court put the “transportation workers” gloss on Section 1 in its 2001 Circuit City Stores, Inc. v. Adams decision. 532 U.S. 105.
Reasoning from the Massachusetts Supreme Judicial Court’s 2009 and 2013 Feeney v. Dell decisions addressing arbitration provision class action waivers in the context of Massachusetts General Laws Chapter 93A (Consumer Protection Act) claims and the SJC’s 2013 Machado v. System4 decision concerning Massachusetts Wage Act class actions, the First Circuit decided “the SJC would conclude that . . . the statutory rights to proceed as a class articulated in the Massachusetts Wage Act, Independent Contractor Misclassification Law, and Minimum Wage Law—as well as the statutory provision that precludes contractual waiver of these rights [in the first two of those laws]—represent the fundamental public policy of Massachusetts, and that the SJC would therefore invalidate a class waiver in an employment contract” not governed by the FAA.
Because the court found “the Agreement stipulates that the class waiver provisions cannot be severed from the rest of the dispute resolution section,” it held that “the arbitration provision would be similarly unenforceable” in its entirety. The court affirmed the district court’s denial of Amazon’s motion to compel arbitration, sending the putative class action back to the Western District of Washington (don’t ask).
The breadth of the “transportation workers” exemption is presently before the Ninth Circuit Court of Appeals in Rittmann v. Amazon.com, Inc., an appeal from a 2019 Western District of Washington decision holding that Amazon delivery drivers are “transportation workers” whose contracts are exempt from the FAA and denying Amazon’s motion to compel arbitration. 383 F.Supp.3d 1196; Ninth Circuit Case No. 19-35381 (argued Feb. 3, 2020). It is also before the Seventh Circuit Court of Appeals in Wallace v. Grubhub Holdings Inc., an appeal from a 2019 Northern District of Illinois decision holding that food delivery service drivers are not “transportation workers” and granting Grubhub’s motion to compel arbitration. 2019 WL 1399986 (March 28, 2019); Seventh Circuit Case No. 19-1564 (argued Feb. 12, 2020).
See also the following recent District of Massachusetts cases: Cunningham v. Lyft, Inc., 2020 WL 1503320 (March 27, 2020) (Lyft drivers are “transportation workers” regardless of whether they cross states lines; arbitration provision containing class action waiver is not enforceable under Massachusetts law); Doucette v. CarMax Auto Superstores, Inc., 2020 WL 1332836 (March 23, 2020) (salesman who was sometimes involved in arranging for transport of purchased vehicles from one CarMax location to the customer’s location, sometimes across state lines and sometimes driving the vehicle himself, is not a “transportation worker” as contemplated by FAA Section 1; arbitration provision, including class action waiver, enforced); Austin v. DoorDash, Inc., 2019 WL 4804781 (Sept. 30, 2019) (food delivery service driver who does not cross state lines delivering restaurant food is not a “transportation worker” covered by Section 1).
Lessons from this decision for those whose workers might be considered “transportation workers,” in addition to the decision’s broadening of the reach of the FAA Section 1 “transportation workers” exemption:
The “transportation workers” exemption covers independent contractors. The First Circuit noted the Supreme Court’s decision last year holding that the “transportation workers” exemption in FAA Section 1 applies to “agreements to perform work,” including those of independent contractors such as plaintiff Waithaka. See New Prime Inc. v. Oliveira, 139 S. Ct. 532, 544.
Take care in writing class action waivers. Because Waithaka’s contract’s arbitration clause contained the following provisions, the First Circuit held that the contract “stipulates that the class waiver provisions cannot be severed from the rest of the dispute resolution section”:
[The contract] does not provide for, and parties do not consent to, arbitration on a class, collective or representative basis . . . [and it] shall not be interpreted as requiring either party to arbitrate disputes on a class, collective or representative basis, even if a court or arbitrator invalidates or modifies or declines to enforce the Agreement in whole or in part.
The District of Massachusetts Cunningham v. Lyft decision denying a motion to compel arbitration notes the following statement in the arbitration provision there at issue but does not address its effect as to the class action waiver the court deemed unenforceable: “in the event that any portion of this Arbitration Agreement is deemed illegal or unenforceable under applicable law not preempted by the FAA, such provision shall be severed and the remainder of the Arbitration Agreement shall be given full force and effect.”
Do not count on choice of law provisions being honored with respect to workers in states with public policies antithetical to arbitration, including policies favoring class actions. The Amazon “last mile” drivers’ contracts specified that the laws of the state of Washington governed, except as to the arbitration provision, as to which the FAA and “applicable federal law” governed. Noting that Amazon did not contest that Massachusetts has “a materially greater interest” than Washington in the enforceability of the contracts’ class action waiver and arbitration provisions, the First Circuit held that Massachusetts’s interest overrode the parties’ contractual choice of law and assessed the arbitration provision under Massachusetts law.
The Rittmann v. Amazon district court, presented with the same governing law provision, and having decided that Amazon “last mile” drivers were “transportation workers” under Section 1, essentially threw up its hands: “When the parties signed the contract at issue, Plaintiffs likely had no reason to believe that Washington law would ever apply to the Arbitration Provision. . . . Because it is not clear what law to apply to the Arbitration Provision or whether the parties intended the Arbitration Provision to remain enforceable in the event that the FAA was found to be inapplicable, the Court finds that there is not a valid agreement to arbitrate.” 383 F.Supp.3d at 1203.
To learn more about the issues raised by this client bulletin, please contact John Snyder at jsnyder@potomaclaw.com.
Note: This publication is distributed with the understanding that the author, publisher and distributor of this publication and/or any linked publication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising.
