By Ronald Miller, J.D.
Transportation workers do not actually have to cross state lines to be “engaged in interstate commerce” for the FAA exemption to apply.
The Ninth Circuit affirmed the denial of a motion to compel arbitration filed by Amazon.com in a suit challenging the online retailer’s classification of drivers in its AmFlex program as independent contractors. Agreeing with the First Circuit, the appeals court determined that AmFlex delivery providers in this case were transportation workers engaged in interstate commerce and were thus exempt from the FAA’s enforcement provisions pursuant to § 1. The appeals court further held that the parties did not enter into a valid agreement to arbitrate and that there was no other ground upon which it could enforce the arbitration provision. Judge Bress filed a separate dissenting opinion (Rittmann v. Amazon.com, Inc., August 19, 2020, Smith, M., Jr.).
AmFlex program. The employees in this case contracted with Amazon Logistics to provide delivery services for AmFlex. Historically, Amazon.com, the online retailer, shipped its products using large third-party delivery providers. Recently, it has supplemented those delivery services by contracting with local delivery providers through its AmFlex program, in which Amazon contracts with individuals to make “last mile” deliveries of products using the AmFlex smart phone application.
Individual contractor. To sign up for the AmFlex programs, individuals must agree to the AmFlex individual contractor terms of service (TOS) in the app. Under the terms of the agreement, the individual agrees to binding arbitration of disputes and waives action on a class or collective basis. Three of the four named plaintiffs opted out of arbitration when they signed up for AmFlex and so were not subject to the arbitration provision. The fourth plaintiff, Lawson, did not opt out.
In 2016, three of the plaintiffs filed this class and collective action alleging that Amazon misclassified its AmFlex users as independent contractors rather than employees. Lawson was later added as a named plaintiff. The complaint alleged that Amazon violated the FLSA and the wage and hour laws of California, Washington state, and the City of Seattle. Amazon moved to compel arbitration of Lawson’s claims.
Motion to compel arbitration. The district court denied Amazon’s motion to compel arbitration, finding that Lawson’s claims fell within the FAA’s transportation worker exemption, which exempts from the FAA’s arbitration enforcement provisions the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. § 1. The district court then considered whether the arbitration provision in Section 11 was otherwise valid and enforceable. It determined that the TOS bars application of Washington state law to the arbitration provision. As a result, the district court concluded that there was no valid arbitration agreement between Amazon and Lawson, and it denied the motion to compel.
Travel across state lines. On appeal, Amazon challenged the district court’s conclusion that AmFlex delivery providers are exempt from the FAA as transportation workers. Rather, it asserted that its delivery providers participate “in purely intrastate activities” when they make last mile deliveries and thus are not engaged in interstate commerce.” Amazon asserted that transportation workers must actually cross state lines to be “engaged in interstate commerce” for the exemption to apply.
Stream of commerce. Agreeing with the First Circuit’s decision in Waithaka v. Amazon.com, Inc., the Ninth Circuit held that AmFlex delivery workers were exempt from the FAA’s enforcement provisions because they were transportation workers engaged in interstate commerce under 9 U.S.C. § 1 when they made “last mile” deliveries of goods in the stream of interstate commerce. Considering the plain meaning of the relevant statutory text, case law interpreting the exemption’s scope and application, and the construction of similar statutory language, the appeals court held that to be “engaged in interstate commerce,” the AmFlex workers did not themselves need to cross state lines.
Accordingly, the appeals court concluded that AmFlex delivery providers belonged to a class of workers engaged in interstate commerce that falls within § 1’s exemption. AmFlex delivery providers are a class of workers that transport packages through to the conclusion of their journeys in interstate and foreign commerce. Amazon packages do not “come to rest” at Amazon warehouses, and thus the interstate transactions do not conclude at those warehouses. The interstate transactions between Amazon and the customer do not conclude until the packages reach their intended destinations, making AmFlex drivers engaged in the movement of interstate commerce.
Arbitration agreement. Further, the appeals court concluded that there was no valid and enforceable arbitration agreement. It rejected Amazon’s assertion that it could nevertheless enforce the arbitration provision pursuant to federal law and Washington state law. To support its assertion, Amazon pointed to the TOS’s choice of law provision. According to Amazon, the parties did not negotiate for the FAA to apply only to make the FAA inapplicable. Thus, “[f]or the parties’ choice-of-FAA provision to have any meaning, it must mean more than that the FAA governs to the extent it governs of its own force.” The appeals court rejected that circular argument.
Instead, because the court must give effect to the parties’ contract as written, the FAA does not apply because the arbitration provision is still subject to the transportation worker exemption in § 1. As a result, the court could not conclude that any federal law governed the TOS’s arbitration provision.
State law. Moreover, the appeals court rejected Amazon’s assertion that Washington state law governed the arbitration provision pursuant to the TOS’s severability provision or by applying choice of law principles. Because it is not clear that the parties intended to apply Washington law to the arbitration provision in the event the FAA did not apply, the appeals court construed the ambiguity in the contract against Amazon to avoid that result.
Dissent. In a dissenting opinion, Judge Bress concluded that for a delivery worker to be “engaged in” interstate commerce under the FAA, the driver must belong to a “class of workers” that crosses state lines in the course of making deliveries. He argued that the majority constructed a new FAA doctrine under which the exemption turns on the supposed “continuity” of the interstate commerce and where items “come to rest.” Importing a “come to rest” doctrine into the FAA is ill-advised, argued the dissenting judge, who would have held that the district court erred in denying Amazon’s motion to compel arbitration.
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