Labor & Employment Law Daily Grubhub delivery drivers didn’t fall under FAA’s transportation worker exemption
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Friday, August 7, 2020

Grubhub delivery drivers didn’t fall under FAA’s transportation worker exemption

By Ronald Miller, J.D.

Transportation workers are those who are “actually engaged in the movement of goods in interstate commerce,” not merely the delivery of goods that have moved in interstate commerce.

Grubhub delivery drivers are not exempt under § 1 of the Federal Arbitration Act as transportation workers, ruled the Seventh Circuit. Section 1 of the FAA carves out a narrow exception to the obligation of federal courts to enforce arbitration agreements. To show that they fell within this exception, the drivers had to demonstrate that the interstate movement of goods was a central part of the job description of the class of workers to which they belonged. Here, the drivers focused on the fact that they carried goods that have moved across state lines, not that they themselves were “engaged in the channels of foreign or interstate commerce.” Accordingly, the district courts were right to conclude that the drivers’ contracts with Grubhub did not fall within § 1 of the FAA (Wallace v. Grubhub Holdings, Inc., August 4, 2020, Barrett, A.).

Grubhub operates an on-line ordering and delivery platform for diners to order from local restaurants. Once the food is ready, a Grubhub delivery driver can deliver it. Grubhub considers its drives to be independent contractors rather than employees entitled to the protections of the FLSA. The plaintiffs in this consolidated action, who worked as Grubhub drivers in various cities, disagreed. They filed two suits alleging, among other things, that Grubhub violated the FLSA by failing to pay them overtime.

However, each of the plaintiffs had signed a “Delivery Service Provider Agreement” that required them to submit to arbitration for “any and all claims” arising out of their relationship with Grubhub. Grubhub moved to compel arbitration. The plaintiffs responded that the district court could not compel them to arbitrate because their contracts with Grubhub were exempt from FAA coverage. Both district courts concluded that the FAA applied and compelled arbitration.

Residual category. In Epic Systems Corp. v. Lewis, the Supreme Court ruled that the FAA broadly requires courts to enforce arbitration agreements according to their terms. But its breadth is not unqualified. Section 1 of the Act exempts two enumerated categories of workers—”seamen” and “railroad employees”—as well as a residual category of “any other class of workers engaged in foreign or interstate commerce.” The Supreme Court had already resolved in New Prime, Inc. v. Oliveira that this exemption, which applies to “contracts of employment,” covers independent contractors as well as employees, and the Grubhub drivers contended it applied to them.

The text of the residual category provides that the operative unit is a “class of workers.” So in whether the exemption applies, what matters is “‘not whether the individual worker actually engaged in interstate commerce, but whether the class of workers to which the complaining worker belonged engaged in interstate commerce.’” That means that a member of the class qualifies for the exemption even if he or she does not personally engage in interstate commerce.

Engaged in interstate commerce. So what does it mean for a class of workers to be engaged in interstate commerce? In Circuit City Stores, Inc. v. Adams, the Supreme Court held that the residual clause applies only to the employment contracts of workers engaged in the movement of goods in interstate commerce. The Court explained that the phrase “engaged in commerce” as used in § 1 meant something narrower than “affecting commerce” or “involving commerce” as used in § 2. “Engaged in commerce” refers to “active employment” in interstate commerce. The residual clause, then, exempts only workers who are akin to “seamen” and “railroad employees,” a category the court described as “transportation workers.”

The Seventh Circuit inTeamsters Local Union No 50 v Kienstra Precast, LLC, and its sister circuits have repeatedly emphasized that transportation workers are those who are “actually engaged in the movement of goods in interstate commerce.” (That includes the First Circuit, which held in a decision last month that Amazon drivers who deliver packages on the last leg of their journey, but who never themselves crossed state lines, were engaged in interstate commerce.) To determine whether a class of workers meets the definition, the court considers whether the interstate movement of goods is a central part of the class members’ job description. If such a class exists, the court next asks whether the plaintiff is a member of it.

In this instance, rather than focus on whether they belong to a class of workers actively engaged in the movement of goods across interstate lines, the Grubhub drivers stressed that they carried goods that have moved across state lines. But to fall within the exemption, the workers must themselves be “engaged in the channels of foreign or interstate commerce.” By erasing that requirement from the statute, the plaintiffs’ interpretation would sweep in numerous categories of workers whose occupations have nothing to do with interstate transport. That result would run afoul of the Supreme Court’s instruction that the scope of the residual clause “be controlled and defined” by the work done by seamen and railroad workers.

Section 1 carves out a narrow exception from the FAA for a small number of workers who otherwise would fall within § 2’s ambit. Because the Grubhub drivers failed to show that the interstate movement of goods was a central part of the job description of the class of workers to which they belonged, the district courts correctly determined that their contracts with Grubhub did not fall within § 1 of the FAA.

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