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Amazon Loses Bid to Force Arbitration on Delivery Drivers

Drivers who deliver Amazon packages are transportation workers engaged in interstate commerce even if they do not cross state lines, the Ninth Circuit ruled Wednesday.

SAN FRANCISCO (CN) — Drivers who deliver Amazon packages are transportation workers engaged in interstate commerce even if they do not cross state lines, the Ninth Circuit ruled Wednesday.

In a 2-1 ruling, the panel sided with the First Circuit’s opinion from July that declared the drivers exempt from a federal law requiring workers to resolve labor disputes through private arbitration rather than open court. The drivers in both cases claimed Amazon misclassified them as independent contractors rather than employees.

“Amazon’s position rests on the notion that transportation workers must actually cross state lines to be ‘engaged in interstate commerce’ for the exemption to apply. We reject that construction of that statute,” U.S. Circuit Judge Milan Smith wrote for the majority comprising himself and U.S. Circuit Judge N. Randy Smith. Both are George W. Bush appointees.

Instead, Judge Milan Smith wrote, the Federal Arbitration Act’s exemption for transportation workers like seamen and railroad employees is properly read to include Amazon’s AmFlex delivery drivers, because Amazon’s business entails not just selling goods, but also delivering them. 

Smith and his majority colleague agreed with the First Circuit’s conclusion in Waithaka v., Inc. that the phrase “engaged in interstate commerce” does not require a worker to travel across state lines to fall within the arbitration act’s exemption.

Amazon had urged the panel to take a more narrow view because Amazon contracts with AmFlex for local deliveries. Drivers pick up these packages from Amazon warehouses for the last leg of the journey to their final destination. 

But the majority found AmFlex drivers are still part of a continuous line of interstate transactions, a process that does not end with a package’s arrival at a local warehouse.

"The interstate transactions between Amazon and the customer do not conclude until the packages reach their intended destinations, and thus AmFlex drivers are engaged in the movement of interstate commerce,” Judge Milan Smith wrote.

The panel’s dissenter, U.S. Circuit Judge Daniel Bress, said his colleagues lost sight of the fact that AmFlex drivers do their work locally.

“In my view, for a delivery worker to be ‘engaged in’ interstate commerce under the FAA, he must belong to a ‘class of workers’ that crosses state lines in the course of making deliveries,” the Donald Trump appointee wrote.

Bress said he feared that interpreting the statute more broadly would make it confusing to apply, muddying the standard for enforcing arbitration agreements in labor contracts and “leading to perplexing and costly factual inquiries that in turn create uncertainty as to whether a dispute is arbitrable.” 

"In my respectful view, this is not the best reading of the FAA. And it unfortunately creates difficult problems of application, as well as inequities among delivery workers who are similarly situated,” Bress wrote, noting it would be unfair to include AmFlex drivers who make local deliveries but not drivers for food-delivery apps like Doordash. He said in some cases, AmFlex drivers could be carrying the exact same goods.

The majority countered that food orders can be distinguished from Amazon packages since most come from local restaurants and are not part of the stream of interstate commerce. Unlike workers who deliver takeout orders for Doordash or Grubhub, an AmFlex driver is hired to complete the delivery of goods that originate from out of state.

“AmFlex workers form a part of the channels of interstate commerce, and are thus engaged in interstate commerce as we understand that term,” Judge Milan Smith wrote.

The majority held it is up to Congress to revise the federal arbitration law if the circuit’s line-drawing makes it unmanageable. 

Harold Lichten, a partner with the Boston employment firm Lichten & Liss-Riordan P.C. who argued on behalf of the drivers before both circuits, said Wednesday that labor law changes that favor workers may not be too far off — provided Congress can pass the Protecting the Right to Organize Act. Among other changes, the PRO Act would narrow the criteria for classifying workers as independent contractors and bars employers from preventing employees from joining class actions.

The law made it out of the House of Representatives in February 2020. Lichten said passage of the PRO Act will likely be one of Congress' first actions should Joe Biden win the presidency and the Democrats take the Senate. 

“It's probably the number one priority of the labor movement,” Lichten said.

In the meantime, Wednesday’s ruling is a major victory for delivery drivers looking to pursue employment claims in court. Lichten said arbitration is a common tactic used by large corporations to force workers into signing away their right to join class actions over alleged labor violations.

“It’s probably the biggest issue that exists right now.  So many companies require employees to sign arbitration agreements. It’s a horrible situation,” Lichten said.

He also said it’s unlikely the case will reach the U.S. Supreme Court since both the First and Ninth Circuits went the same way. The Ninth Circuit is also unlikely to vote for an en banc review since the panel’s ruling didn’t break down along political lines, Lichten said, noting that Judge Milan Smith and Judge N. Randy Smith were appointed by a Republican.

“It shows this isn’t just a group of liberal justices, it’s a group of conservatives who ruled this way,” he said.

Amazon’s attorney David Salmons with Morgan Lewis did not immediately respond to an email seeking comment. An Amazon spokesperson said in an email that the company has a “longstanding practice of not commenting on pending litigation."

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