The U.S. Court of Appeals for the First Circuit on Nov. 9, 2022, heard oral argument in the latest bids by food delivery drivers to escape arbitration of their putative class actions against Postmates and Grubhub for alleged misclassification and related wage law and sick leave violations. The panel of judges – Sandra Lynch, Bruce Selya and Mary McElroy – appeared ready to join other federal courts of appeals and the Massachusetts Supreme Judicial Court in concluding that local delivery drivers who use the Postmates and Grubhub apps are not engaged in foreign or interstate commerce.
In September 2020, plaintiffs Damon Immediato, Stephen Levine and Eric Wickberg filed a putative class action in Massachusetts Superior Court alleging Postmates had misclassified delivery drivers as independent contractors when they are actually employees and failed to pay them minimum wage and sick leave in violation of Massachusetts law. In August 2021, Levine filed a virtually identical lawsuit against Grubhub. Postmates and Grubhub removed the actions to federal court and filed motions to compel individual arbitration, which the district court granted. As the district court explained in Immediato, the drivers must arbitrate their claims because they do not fall within the so-called transportation workers' exemption under Section 1 of the Federal Arbitration Act (FAA), 9 U.S.C. Section 1.
The drivers appealed, arguing in their briefs that the district court erred when it granted the motions to compel arbitration because the drivers qualify for the Section 1 exemption, as they transport goods within the flow of interstate commerce. Drivers who use the Postmates app deliver prepackaged foods and drinks from restaurants to consumers, as well as other consumer goods from grocery and convenience stores, while drivers who use the Grubhub app deliver food from restaurants to customers at their homes or businesses. Postmates and Grubhub argued in their briefs that the district court correctly compelled individual arbitration because the plaintiffs in both cases belong to a class of local delivery drivers who are not "engaged in foreign or interstate commerce" within the meaning of the Section 1 exemption to the FAA.
During oral argument on Nov. 9, 2022, counsel for Postmates and Grubhub noted there is a uniform consensus among courts across the country that local food delivery drivers are not engaged in foreign or interstate commerce. Judge Selya suggested to the plaintiffs' counsel that she appears to want the First Circuit to reach a decision that goes far beyond the holdings in these other cases. He asked the plaintiffs' counsel whether there is any limiting principle, or whether goods are still in interstate commerce if they sit in a convenience store for 18 months before getting picked up. Counsel responded that there could be a limiting principle, but the court need not reach it because goods can stop along the way and the interstate journey does not end until the goods reach the consumer. But Judge Lynch noted that almost everything today travels in interstate commerce, and the plaintiffs' argument would seem to apply to all goods everywhere. Yet, the Section 1 exemption to the FAA is a narrow exemption, as interpreted by the courts.
When the plaintiffs in these cases chose to become couriers for Postmates or Grubhub, they agreed to arbitrate their claims on an individual basis. The FAA instructs federal courts to enforce arbitration agreements according to their terms. As the Massachusetts Supreme Judicial Court noted recently in Archer v. Grubhub, Inc., Case No. SJC-13228, 2022 WL 2964639, at *5 (July 27, 2022), there is a "uniform wave of authority" in the courts that drivers who deliver takeout food and other prepackaged goods from restaurants, delicatessens and convenience stores are not exempt from arbitration under the FAA's transportation worker exemption. The First Circuit appears poised to join the Massachusetts Supreme Judicial Court and other federal courts of appeals that have addressed this question in concluding that delivery drivers who use the Postmates and Grubhub apps are not exempt from arbitration under Section 1 of the FAA.
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