IN A VICTORY FOR NELF AND FOR THE EMPLOYERS OF LOCAL FOOD DELIVERY DRIVERS, THE MASSACHUSETTS SUPREME JUDICIAL COURT HOLDS THAT GRUBHUB’S DELIVERY DRIVERS DO NOT QUALIFY FOR THE FEDERAL ARBITRATION ACT’S EXEMPTION FOR TRANSPORTATION WORKERS “ENGAGED IN . . . INTERSTATE COMMERCE,” AND THEREFORE MUST COMPLY WITH THEIR ARBITRATION AGREEMENTS, WHICH REQUIRE THE INDIVIDUAL ARBITRATION OF CLAIMS.
Veronica Archer et al. v. Grubhub Holdings, Inc. (Massachusetts Supreme Judicial Court)
NELF filed an amicus brief in the Massachusetts Supreme Court in this case, responding to the Court’s request for amicus briefing on the issue whether local delivery drivers for online and mobile food ordering and delivery services, such as Grubhub, qualify for the Federal Arbitration Act’s exemption, which applies to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The United States Supreme Court has interpreted this residual category to apply only to classes of interstate transportation workers who move goods (or passengers) across state lines in a way that is comparable to the work of seamen and railroad employees. The Grubhub delivery drivers in this case signed (electronically) online arbitration agreements with Grubhub, which required them to arbitrate all work-related disputes, on an individual basis only, unless the drivers opted out of the arbitration agreements within 30 days of signing them. They did not opt out of the arbitration agreements. In spite of their arbitration agreements, the drivers brought a (potential) class action in state court, suing Grubhub for violating various provisions of the Massachusetts wage laws. Grubhub moved to compel the individual arbitration of their claims and to dismiss the plaintiffs’ complaint. The Superior Court denied Grubhub’s motion, concluding that the drivers were exempt from the FAA because, in addition to delivering prepared meals from local restaurants, they also delivered goods, obtained from the shelves of local stores, that had come from out of state.
In NELF’s brief, Ben argued that the Superior Court was wrong and that Grubhub drivers are not exempt from the FAA. Under clear United States Supreme Court case law, the drivers do not move any goods in interstate commerce. Instead, they merely deliver goods that are no longer in interstate commerce, from the shelves of local stores to local customers. The interstate transportation of those goods ended when Massachusetts merchants received the goods from out-of-state sources, according to prior arrangements between those parties. The subsequent sale and delivery of those goods, via the delivery drivers, is an altogether separate and local transaction. There was simply no contract or arrangement between the out-of-state source of the goods and Grubhub itself to deliver the goods continuously and all the way to the Massachusetts customers. Ben argued that NELF’s position is consistent with longstanding Supreme Court precedent and with recent decisions from lower federal courts addressing the same or similar local delivery drivers. These recent cases establish that the local transportation of goods (or passengers) arriving from another state is not part of interstate commerce, unless that local transport is the planned final leg of a continuous delivery route that was fully in place, by contract or some other arrangement, when the goods (or passengers) began their interstate journey. Goods that are acquired and held by local stores for local sale, as in this case, fail this test. By contrast, Amazon.com’s “last-mile” drivers are a good example of drivers who are actually engaged in interstate transportation under this test, and are therefore exempt from the FAA.
In its decision of July 27, 2022, the Supreme Judicial Court embraced Ben’s arguments for NELF and held that the plaintiffs were not transportation workers “engaged in . . . interstate commerce” under the FAA exemption. Therefore, the Court allowed Grubhub’s motion to compel the individual arbitration of the plaintiffs’ claims, under the terms of the arbitration agreements that the plaintiffs had signed online. Accordingly, the Court also dismissed the plaintiffs’ complaint.
As Ben had argued for NELF, the Court held that the plaintiffs were not engaged in the movement of goods across state lines. Instead, they merely provided for the local delivery of certain prepackaged food items that had already ended their interstate journey when they arrived on the shelves of local stores or to local restaurants. In so holding, the Court expressly aligned itself with the great weight of recent decisions on the same issue. “Notably, all courts that have considered the applicability of the residual clause to delivery drivers similar to the plaintiff delivery drivers in this case have reached the same conclusion.”
The Court also embraced Ben’s arguments that distinguished carefully the plaintiffs’ claims from the recent Amazon “last mile driver” cases, in which both the First and Ninth Circuits have held that those drivers do qualify for the FAA exemption. As Ben had argued, the Court recognized that, unlike the plaintiffs, the last-mile drivers are part of a planned and continuous delivery of goods from out of state to the in-state customer:
Significantly, in the ‘last-mile driver’ cases, from the
moment the goods entered ‘the flow of interstate commerce,’ the goods were always ‘destined for’ the customers to whom the last-mile drivers made deliveries. The last leg of the trip, even if it involved only a trip from the in-State warehouse to the in-State consumer, was a part of the ongoing and continuous nature of the interstate transit of the good to the customer who ordered it and thus brought the last mile drivers within [the FAA exemption].
By contrast, as Ben had argued, the Court concluded that the goods at issue here were only “destined for” delivery to local merchants or restaurants in Massachusetts. Accordingly, the Court agreed with Ben’s conclusion that the plaintiffs’ subsequent local delivery of these goods “was not part of the ongoing and continuous interstate transmission of these goods.” As a result, the Court adopted Ben’s conclusion that the plaintiffs’ delivery services do not resemble in any way the interstate activity of seamen, railroad workers, or the Amazon last-mile drivers that qualify under the exemption’s residual clause.
While the Court did not request amicus participation of the disputed issue of online contract formation, it is significant to note that the Court rejected the plaintiffs’ challenge to the validity of the online contracts under Massachusetts contract law. In essence, the Court held that Grubhub provided the plaintiffs with sufficient notice of the contract’s terms and with a valid means to indicate their assent to those terms, by requiring the workers to sign the contracts electronically and to click ‘E-Sign,’ while explaining that, in so doing, the plaintiffs were acknowledging that they had read, understand, and/or agreed to be bound by the contract’s terms.