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Law Alert: Ninth Circuit Weighs in on the “Transportation Worker” Exemption from the FAA

by Braden K. Core, Gregory M. Feary, Prasad Sharma, Ryan W. Wright

August 19, 2020

Today the U.S. Court of Appeals for the Ninth Circuit issued a long-awaited opinion in a case involving the “transportation worker” exemption from the Federal Arbitration Act (FAA).

The question in Rittmann v. Amazon.com, Inc. was whether Amazon’s local delivery drivers operating as part of the company’s AmFlex program were exempt from the FAA. The Ninth Circuit held that transportation workers are not subject to the FAA when they are engaged in the movement of goods that are in the flow of interstate commerce, rejecting Amazon’s argument that the exemption is only triggered if the driver crosses state lines. Because the AmFlex drivers at issue were delivering packages in the “last leg” of the packages’ journeys in interstate commerce, the drivers were deemed exempt from the FAA categorically. Having decided the FAA did not apply, the Court then turned to the issue of whether arbitration could be compelled under state law. Ultimately, the Court concluded that it could not do so based on the wording of the arbitration provisions at issue.

One of the three judges hearing the case penned a lengthy dissent challenging the majority’s analysis, suggesting it will lead to confusion over when the exemption applies. The dissenting judge would have asked simply whether the plaintiffs belong to a “class of workers … [that] crosses state or international lines in the course of their deliveries” but was unable to sway the majority to adopt that approach.

The result is that Amazon must face in court a putative class action alleging that AmFlex drivers were misclassified as independent contractors under federal and California law.

Today’s opinion is the third of a line of recent circuit-court cases interpreting the scope of the “transportation worker” exemption. In July, the U.S. Court of Appeals for the First Circuit also held that AmFlex drivers were exempt from the FAA (see our Transportation Law Alert on that case here). And earlier this month, the U.S. Court of Appeals for the Seventh Circuit held that food-delivery drivers for Grubhub were not exempt from the FAA on the grounds that those drivers belonged to a class of workers for which the interstate movement of goods was not a central part of their job description. Other circuit courts, including the U.S. Court of Appeals for the Eleventh Circuit, are set to consider cases that raise the scope of the transportation worker exemption later this year.

Amazon has petitioned for rehearing en banc in the First Circuit, and Wallace has done the same in the Seventh Circuit. Given the possibility of a “split” emerging among circuit courts on the scope of the exemption, and the vocal dissent in today’s opinion from the Ninth Circuit, we anticipate one or more of these cases will be appealed to the U.S. Supreme Court. Whether the Court will take up this issue after recently construing the same statute in New Prime is difficult to say. 

Of course, regardless of whether a worker is exempt from the FAA, a properly drafted arbitration agreement may be enforced using state law, depending on the jurisdiction. Transportation providers should regularly review their arbitration strategy. Scopelitis’ arbitration team is ready to assist in that review.

For more information, please contact Greg FearyBraden CorePrasad Sharma, or Ryan Wright.

 

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