The First Circuit issued an opinion on Friday affirming the district court’s judgment that independent transportation contractors are exempt from arbitration under the FAA’s transportation exemption. The appealed labor case was filed by Bernard Waithaka’s and was appealed by Amazon after the district court denied Amazon’s motion to compel arbitration. The case was before Chief Judge Howard, Circuit Judge Lipez, and Circuit Judge Thompson.
The case concerned “whether employment contracts of certain delivery workers – those locally transporting goods on the last legs of interstate journeys – are covered by the Federal Arbitration Act (‘FAA’ or the ‘Act’), given its exemption for ‘contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.’” The court held that “the exemption encompasses the contracts of transportation workers who transport goods or people within the flow of interstate commerce, not simply those who physically cross state lines in the course of their work.” As a result, the plaintiff and Amazon’s other “last mile” delivery drivers are within this category of FAA exemption. Subsequently, the court noted that the FAA “does not govern the enforceability of the mandatory arbitration provision of his employment agreement with appellants [Amazon].”
In recent years, Amazon has used independent contractors to deliver goods through its Amazon Flex (AmFlex) smartphone app; the contractors can sign up for shifts and use their own means of transportation, typically their own car, and adhering to Amazon’s standards to deliver packages consumers ordered from Amazon. However, if a contractor takes longer than their shift to complete their deliveries they are not compensated for this extra time; they are also not reimbursed for gas, vehicle maintenance, or cell phone data costs, despite these being necessary for the job. Working with AmFlex, an individual agrees to its terms of service, which requires settling disputes through arbitration, governed by the FAA and other federal laws.
Appellee Waithaka is an AmFlex driver in Massachusetts since 2017; he has not crossed state lines and he did not opt out of the arbitration agreement. The appellee claimed that Amazon misclassified AmFlex drivers as independent contractors, instead of employees; violated the Massachusetts Wage Act for failing to reimburse drivers; and violated the Massachusetts Minimum Wage Law. Eventually, Amazon moved to compel arbitration or to transfer the case. The district court concluded that the appellee’s agreement was exempt from FAA and that Massachusetts state law governed enforceability of arbitration, however, the arbitration provision was unenforceable based on Massachusetts public policy. The case was transferred to the Western District of Washington as requested. Amazon appealed its denied motion to compel arbitration and the Washington proceeding was stayed pending the appeal.
The court stated that the FAA does not apply to all contracts with arbitration provisions. The judges noted that the transportation exemption “does not apply exclusively to contracts of ‘employees,’ but rather to ‘agreements to perform work,’ including those of independent contractors.” As a result, the Amazon agreements fall within the exemption because appellee Waithaka qualifies as a transportation worker and because the court determined that interstate commerce did not require the crossing of state lines; instead referring to transporting goods in the flow of interstate commerce.
The court concluded that the FAA does not govern the enforceability of the arbitration agreement and that the agreement violates Massachusetts public policy because it favors consumer class actions and “based on conflict-of-laws principles, the contractual choice of Washington law would be unenforceable”; as a result, arbitration cannot be compelled. Consequently, Waithaka and the class are exempt from arbitration. The First Circuit affirmed the district court’s denial of Amazon’s motion to compel arbitration.
Appellee Waithaka is represented by Lichten & Liss-Riordan, P.C. Amazon is represented by Morgan, Lewis & Bockius LLP.