Labor & Employment Law Daily Amazon may not force FAA-exempt delivery drivers to arbitrate claims they were misclassified
Friday, April 26, 2019

Amazon may not force FAA-exempt delivery drivers to arbitrate claims they were misclassified

By Kathleen Kapusta, J.D.

Because the delivery drivers fell within the FAA’s transportation worker exemption and state law did not apply, there was no valid agreement to arbitrate.

In a victory for and Amazon Logistics delivery drivers who alleged the online retailer misclassified them as independent contractors, a federal court in Washington denied Amazon’s motion to compel arbitration of their claims. Not only was the Federal Arbitration Act inapplicable to the arbitration provision in question because the drivers fell within its transportation worker exemption, the court found the parties clearly indicated that Washington law was also inapplicable. Because it was not clear what law to apply or whether the parties even intended the arbitration provision remain enforceable in the event the FAA was inapplicable, there was no valid agreement to arbitrate (Rittman v., Inc., April 23, 2019, Coughenour, J.).

The plaintiff drivers were parties to individual contracts with Amazon and of the tens of thousands of putative class members, all but approximately 165 were parties to a contract containing a provision mandating individual arbitration. The provision also stated that the FAA would govern any disputes between the parties. Although a separate clause—the governing law provision—provided that Washington state law would govern the terms of the contract, it specifically stated that the arbitration provision would be governed by the FAA.

Transportation worker exemption. Although Amazon moved to compel arbitration, the drivers argued that the arbitration provision was unenforceable because they fell within the transportation worker exemption in Section 1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Observing that Section 1 is narrowly construed, the court pointed out that many courts in the Ninth Circuit have interpreted the exemption to require a stricter association between the employee and interstate commerce than might otherwise be required under other legislation.

They have also recognized that in order for a delivery driver to qualify for the transportation worker exemption, the delivered good must have originated, or transformed into its final condition, in a different state than the delivery state. Noting that the Amazon drivers deliver packaged goods shipped from around the country and delivered to the consumer untransformed, the court found their work was readily distinguishable from the workers in those cases. For example, in Lee v. Postmates Inc., a federal court in California found that the plaintiffs failed to establish that they fell within the exemption because they did “not cite any case holding that making only local deliveries, for a company that does not hold itself out as transporting goods between states, constitutes engaging in interstate commerce within the meaning of the statute.”

Akin to UPS and FedEx. Here, said the court, the Amazon defendants “are akin to UPS and FedEx—they are widely known as a company able to transport goods across the country to consumers in a couple of days. To be sure, Defendants admit that they historically contracted with UPS and FedEx for the services that Plaintiffs now provide.”

After discussing several out-of-circuit cases with more relevant facts, the court explained that “If an employer’s business is centered around the interstate transport of goods and the employee’s job is to transport those goods to their final destination—even if it is the last leg of the journey—that employee falls within the transportation worker exemption.”

Strike would be disruptive. Further, the court pointed out, when deciding whether a particular employee falls within the transportation worker exemption, courts often consider whether a strike by a group of the employees at issue would interrupt interstate commerce. And here, a strike by a large group of plaintiffs and those similarly situated would interrupt interstate commerce, as the Amazon defendants are one of the country’s largest businesses engaged in the interstate shipment of packages and goods.

Enforceability of contract. Because the FAA was inapplicable to the arbitration provision, the court turned to whether it was nonetheless enforceable. Although the Amazon defendants argued that Washington law was clearly applicable in the event the FAA did not apply, the court disagreed.

Pointing out that the parties, through the governing law provision, explicitly contracted for Washington law to not apply to the arbitration provision, the court explained that if they had “intended Washington law to apply if the FAA was found to be inapplicable, they would have said so or even remained silent on the issue.” Indeed, said the court, it appeared that it was precisely against the parties’ intent to apply Washington law to the arbitration provision.

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