Seyfarth Synopsis: Couriers who transport goods from restaurants and grocers who have connected to consumers via the Postmates app are not “engaged in foreign or interstate commerce,” according to a recent decision by the First Circuit Court of Appeals. As a result, the couriers don’t satisfy the “transportation worker” exception to the Federal Arbitration Act (FAA), and they can be compelled to have their claims heard in arbitration on an individual basis rather than court on potentially a class basis. The decision distinguishes a U.S. Supreme Court opinion from the last term that held ramp agents who load cargo on and off planes, but who do not themselves cross state lines, nevertheless satisfy the exemption, as we wrote about here.
Postmates, Inc. (“Postmates”) provides an app that works as a multisided platform. The app facilitates connections between consumers who want to buy things; local merchants, such as restaurants and grocery stores, who went to sell things; and couriers willing to deliver orders from one to the other. The Postmates app also facilitates payment between the customer, merchant, and courier.
Anyone may sign-up to be a courier. When one enrolls, they are presented a “fleet agreement” that specifies the courier is being engaged as an independent contractor. The agreement also includes a Mutual Arbitration Provision by which both Postmates and the courier “mutually agree to resolve any disputes between them exclusively through final and binding arbitration instead of filing a lawsuit in court.” Couriers have the option to opt-out of the Mutual Arbitration Provision but must do so within 30 days.
In Immediato, et al. v. Postmates, Inc., the named plaintiffs are couriers in the Boston area who signed the fleet agreement on multiple occasions and did not opt-out of the arbitration provision. The driving services provided by the plaintiffs rarely took them across state lines.
The couriers filed a complaint in state court alleging that they and a putative class of couriers in Massachusetts should have been treated as employees, not independent contractors, and thus entitled to certain wage protections and reimbursement of business expenses, among other things. Postmates removed the case to federal court, then moved to compel the claims to arbitration. The plaintiffs argued that they are engaged in interstate commerce and therefore exempt under the FAA. The district court disagreed, and compelled the claims to arbitration. This appeal by the couriers ensued.
What did the First Circuit Hold?
On appeal, the plaintiffs reiterated their argument that couriers belong to a “class of workers engaged in foreign or interstate commerce” who are exempt under Section 1 of the FAA. The couriers largely relied on a recent First Circuit decision that delivery drivers who served as the final leg, “or last mile,” in a larger interstate delivery chain are engaged in interstate commerce and thus cannot be compelled to arbitration under the FAA. The panel stood behind its previous holding, but cautioned that for the exemption to apply, the work “must be a constituent part of that movement, as opposed to a part of an independent and contingent intrastate transaction.”
That test was not satisfied in this case because a whopping 99.66% of orders placed in Massachusetts are fulfilled by couriers within the state, with couriers traveling an average distance of just four miles to complete their deliveries. Concluding the couriers fell outside the exemption, the appellate court explained that “Although the appellants transport goods, qua couriers, they do so as part of separate intrastate transactions that are not themselves within interstate commerce.” Put another way, “To be ‘engaged in interstate commerce’ is a ‘practical concept’ that excludes intrastate transactions that bear only a ‘casual’ or ‘incidental’ relationship to the interstate movement of goods or people.”
In this respect, the First Circuit’s decision tracks with the Supreme Court’s decision in Saxon v. Southwest Airlines. In that case, the Supreme Court delved deep into the facts to conclude that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce (e.g., transportation) of that cargo.” The Supreme Court declined, however, to let such determinations be made on more sweeping grounds, for example by merely considering the industry in which the company is engaged.
Implications for Employers
District courts and courts of appeal continue to define the counters of the FAA’s transportation worker exemption in light of the Supreme Court’s guidance. This decision by the First Circuit delivers businesses additional authority to support that merely tangential relationships to interstate and foreign commerce will not suffice, and that a greater number of purported class or collective claims by workers instead must be heard in arbitration on an individual basis. Expect plaintiffs’ counsel to continue to test where exactly the line may be drawn in their efforts to avoid arbitration and litigate collective and class claims in court.