CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

Archive for the ‘Wage & Hour’ Category

9th Circuit Holds Amazon’s Last-Mile Delivery Drivers are Exempt from Arbitration

Posted on: August 21st, 2020

By: Josue Aparicio[1]

On Wednesday, the Ninth Circuit Court of Appeals held that Amazon’s delivery drivers are exempt from the Federal Arbitration Act (“FAA”) because they are transportation workers “engaged in interstate commerce.”

The decision is a huge loss for e-commerce giant, Amazon.com, who is facing several class action lawsuits arising from its “Amazon Flex” program; a delivery service platform in which Amazon contracts with a fleet of on-demand, gig economy workers to perform “last mile” deliveries of Amazon packages. Like many gig workers, Amazon’s so-called “flex drivers” are classified as independent contractors, perform deliveries using their personal vehicles, and follow assigned delivery routes provided by the Amazon Flex smartphone application.

In a 2-1 decision, a divided Ninth Circuit panel affirmed the lower court’s ruling that denied Amazon’s motion to compel arbitration of its flex drivers’ wage and hour class action.[2] Contrary to Amazon’s contentions, the court found the flex drivers did not have to physically cross state lines to be “engaged in interstate commerce” or to fall within the FAA’s so-called “transportation workers” exemption. In the court’s view, since Amazon is “one of the world’s largest online retailers” in the business of shipping goods worldwide, its delivery drivers are “engaged in interstate commerce” through their participation in delivering packages that travel through the “stream of interstate commerce.”

Rittmann v. Amazon.Com, Inc.

In 2016, flex drivers filed a nationwide class and collective action against Amazon.com, alleging the company misclassified them as independent contractors thereby denying them the benefits and protections of state and federal labor laws.

In response, Amazon moved to compel arbitration of the plaintiffs’ individual claims based on an arbitration provision within the terms of service of the Amazon Flex mobile app, which flex drivers must agree to before they can sign up for the Amazon Flex program. Importantly, the terms of service expressly state that the agreement is governed by the laws of the state of Washington, except for the arbitration provision which is governed exclusively by the Federal Arbitration Act (“FAA”).

In April 2019, Judge Coughenour of the U.S. Federal District Court for the Western District of Washington denied Amazon’s motion and concluded that flex drivers fall within the “transportation worker” exemption to the FAA because they deliver goods shipped from across the country.[3] Consequently, since the FAA did not apply and the parties expressly contracted that Washington law could not apply, the district court invalidated the arbitration agreement because it was unclear what law would apply or if the parties even intended to arbitrate disputes in the event the FAA did not apply. Amazon appealed the ruling to the Ninth Circuit.

The Ninth Circuit’s Interpretation of the Transportation Worker Exemption

While the FAA applies broadly to arbitration agreements and reflects a liberal policy favoring arbitration, Section 1 of the statute renders its enforcement provisions inapplicable to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”[4] The U.S. Supreme Court in its 2001 landmark decision, Circuit City Stores, Inc. v. Adams, construed the language in Section 1 narrowly to apply exclusively to “transportation workers.”[5] However, the Court never defined the term “transportation worker,” and since then, state and federal courts have struggled to determine which “class of workers” fall within the ambit of the exemption.

On appeal, Amazon challenged the district court’s ruling by asserting that its flex drivers are exclusively “engaged in local, intrastate activities” because they do not cross state lines when performing deliveries. According to Amazon, a worker must physically cross state lines in the course of making deliveries to be “engaged in foreign or interstate commerce” for the exemption to apply.

The Ninth Circuit majority disagreed and held that crossing state lines is not a necessary condition for the application of the transportation worker exemption. In the court’s view, an interstate transaction between Amazon and a customer does not conclude until the package reaches its intended destination. Accordingly, when an Amazon package travels interstate and is held locally in an Amazon warehouse, the interstate journey of the package does not “come to rest” until it is delivered to the intended recipient. Therefore, even though flex drivers only pick up packages from local Amazon warehouses and deliver them “purely intrastate” to a customer’s home, the driver is “engaged in interstate commerce” by performing the last leg or “last mile” of the interstate journey. Based on this reasoning, the Ninth Circuit held that flex drivers are exempt from the FAA under the transportation worker exemption.

In affirming the lower court’s ruling, the Ninth Circuit also agreed that since the FAA does not apply and the contract terms state Washington law cannot apply to the arbitration provision, there is no valid arbitration agreement between the parties.

However, in a 36-page dissenting opinion, Judge Daniel Bress criticized the majority opinion for creating further uncertainty around the interpretation of the “transportation worker” exemption, “as well as inequities among delivery workers who are similarly situated.” In his view, to be “engaged in interstate commerce” the delivery driver “must belong to a ‘class of workers’ that crosses state lines in the course of making deliveries,” otherwise what should be a narrow exemption “could broadly include anyone who delivers goods between any two locations.”

This ruling comes just a month after the First Circuit Court of Appeals also rejected Amazon’s motion to compel arbitration in a lawsuit involving a putative class of flex drivers from Massachusetts who similarly allege Amazon misclassified them as independent contractors.[6]

Employer Takeaways

Recent federal appellate court decisions have certainly expanded the “class of workers” exempt from the FAA. In addition to the Ninth and First Circuit’s inclusion of “last-mile” delivery drivers, the Third Circuit recently expanded the exemption to include workers who transport passengers, such as ride sharing companies, Uber and Lyft.[7]

On the other hand, the Ninth Circuit’s Rittmann decision made clear that individuals delivering food or meals for companies like DoorDash, GrubHub and Postmates are not “engaged in interstate commerce.” In the court’s view, there is an important distinction between making local deliveries of goods that have arrived at a local restaurant and whose continuous interstate journey is broken, as opposed to the packages delivered by Amazon’s flex drivers, which are often shipped from out of state and do not end their interstate journey until they reach the intended consumer.

If you have questions or would like more information, please contact Josue Aparicio at [email protected].


[1] Josue Aparicio is an Attorney with Freeman, Mathis & Gary LLP who specializes in worker misclassification claims under California law. (https://www.fmglaw.com/attorney_bio.php?id=408)

[2] Rittmann v. Amazon.com, Inc. (9th Cir. 2020), Case No. 19-35381.

[3] Rittmann v. Amazon.com, Inc. (W.D.Wash. 2019) 383 F. Supp. 3d 1196.

[4] 9 U.S.C. § 1 (emphasis added).

[5] Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 118-119.

[6] Waithaka v. Amazon.com, Inc. (1st Cir. 2020) 966 F.3d 10.

[7] Singh v. Uber Techs., Inc. (3d Cir. 2019) 939 F.3d 210, 219; Cunningham v. Lyft, Inc. (D.Mass. March 27, 2020) Case No. 1:19-cv-11974.

An Uber Disruption: California Judge Grants Preliminary Injunction Requiring Uber and Lyft to Stop Classifying Drivers as Independent Contractors

Posted on: August 14th, 2020

By: Josue Aparicio[1]

On Monday, a California Judge granted a preliminary injunction ordering that the popular ride-hailing companies, Uber and Lyft, stop classifying their drivers as independent contractors during the pendency of their litigation against the state of California.

Importantly, the ruling by Judge Ethan Schulman of the San Francisco Superior Court does not automatically convert California’s Uber and Lyft drivers into employees. Rather, it sets up what is expected to be a lengthy appeal process arising from California’s ongoing enforcement of its controversial new law, Assembly Bill No. 5. This decision, however, poses an existential threat to the so-called “gig economy” business model, which relies on a fleet of app-based, on demand, independent contractors who set their own hours, but are not entitled to many of the benefits and protections of California’s labor and employment laws.

The ruling is stayed until August 20th to allow for Uber and Lyft to appeal. On Thursday, Judge Schulman denied both companies’ request to extend the stay beyond August 20th, forcing Uber and Lyft to seek a stay from the appellate court.

California’s Controversial A.B. 5

In September 2019, the California Legislature passed, and Governor Gavin Newsom signed into law, Assembly Bill No. 5 (“A.B. 5”). A.B. 5, which took effect on January 1, 2020, codified the so-called “ABC test” adopted by the California Supreme Court in its 2018 landmark decision, Dynamex Operations West, Inc. v. Superior Court.[2] Under the ABC test, any person providing labor or services for compensation is presumed to be an employee, rather than an independent contractor, unless the “hiring entity” demonstrates that all three of the following conditions are satisfied:[3]

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In response, three tech companies—Uber, Lyft, and Doordash—filed Proposition 22,[4] a California ballot initiative on the November 2020 ballot that, if enacted, would classify certain app-based drivers as independent contractors and essentially override A.B. 5. Additionally, just two days before its enactment, Uber and Postmates, Inc. filed a lawsuit[5] in federal court against the State of California asserting that A.B. 5 unconstitutionally “targets” gig economy companies and treats them differently from similarly situated groups. In February 2020, a federal district court denied Uber and Postmates’ request for a preliminary injunction that would have prevented the state of California from enforcing A.B. 5 against the two tech companies. An appeal to this ruling is pending in the Ninth Circuit Court of Appeal.

The State of California v. Uber and Lyft

In May, California Attorney General Xavier Becerra joined forces with the City Attorneys of San Francisco, Los Angeles and San Diego to file a lawsuit against Uber and Lyft, asserting the two ride-hailing companies misclassified their drivers as independent contractors in violation of California’s A.B. 5. Then, in June, the State moved for a preliminary injunction enjoining Uber and Lyft from classifying their drivers as independent contractors.

In a 34-page decision, Judge Schulman granted the State’s preliminary injunction, and made three important determinations, which could have major ramifications on the gig economy. First, the court found that Uber and Lyft are indeed “hiring entities” within the meaning of A.B. 5. Second, the court found that Uber and Lyft are in the “transportation business,” as opposed to self-proclaimed “technology companies.” Finally, the court found that the potential adverse effects of reclassifying Uber and Lyft’s drivers, even given the COVID-19 pandemic, did not outweigh the “substantial public harm” that would result to drivers, competing businesses and the general public if the preliminary injunction were not granted.

Employer Takeaway

If upheld, this ruling could have serious implications on the “gig economy.” If these drivers are classified as “employees,” companies like Uber and Lyft would be required to substantially change their business practices and provide their drivers certain benefits employees are entitled to under California law, such as minimum wage, overtime pay, workers’ compensation, unemployment insurance, paid sick leave, and paid family leave.

Companies with a large workforce of independent contractors should be put on notice that this ruling is yet another example of what appears to be California’s increased efforts to enforce A.B. 5 and reclassify the state’s independent contractors as employees. In February, the San Diego City Attorney’s office obtained a similar preliminary injunction against the grocery-delivery platform, Instacart.[6] In June, San Francisco’s District Attorney’s office filed a lawsuit[7] against the takeout delivery platform, DoorDash, Inc., alleging the company is misclassifying its delivery drivers as independent contractors in violation of A.B. 5, and similarly seeks a preliminary injunction to stop the alleged misclassification. And just last week, the California Labor Commissioner’s Office filed a pair of lawsuits in Alameda County Superior Court, which allege Uber and Lyft committed systemic wage theft by misclassifying drivers as independent contractors.

If you have questions or would like more information, please contact Josue Aparicio at [email protected].


[1] Josue Aparicio is an Attorney with Freeman, Mathis & Gary who specializes in worker misclassification claims under California law. (https://www.fmglaw.com/attorney_bio.php?id=408)

[2] Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903.

[3] Lab. Code § 2750.3(a)(1)

[4] Proposition 22, the Protect App-Based Drivers and Services Act, would provide that app-based rideshare and delivery drivers are independent contractors and not employees or agents with respect to their relationship with a network company if certain conditions are met. (Qualified Statewide Ballot Measures, Cal. Secretary of State, https://www.sos.ca.gov/elections/ballot-measures/qualified-ballot-measures/).

[5] Olson v. California (C.D. Cal. Feb. 10, 2020) No. CV 19-10956-DMG, appeal filed, No. 20-55267 (March 11, 2020)

[6] The People of the State of California v. Mablebear, Inc., San Diego Superior Court, Case No. 37-2019-00048731

[7] The People of the State of California v. DoorDash, Inc., San Francisco Superior Court, Case No. CGC-20-584789 (filed June 16, 2020).

Wage & Hour Violations, Family Leave, Discrimination, Harassment

Posted on: May 22nd, 2020

By: David Daniels

These topics continue to generate conversation throughout workplaces across the country. No matter the size of your business, at some point you will encounter one of these regulations. For that reason, it’s important for supervisors and managers to understand the basics of employment laws and regulations to maintain proper compliance.  Here is a 30,000 foot view of the employment areas that can be the most troubling for the employer.

At-Will Employment

We all know that at-will employment means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without suffering legal liability. Likewise, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.

Most organizations will define their employment policies in an employee handbook or manual, a job application or contract. Though not legally mandated, many employers require new hires to sign the employment handbook acknowledging that they have read and are aware of the policies in place.

State laws offer some general protection from at-will termination since most employers are required to provide the following within 24 to 72 hours of separation:

  • Final Paycheck
  • Benefits an employee is entitled to, such as severance or continued health insurance
  • Any statutory benefits, such as unemployment compensation or other forms of government benefits

If an employer violates the worker’s right through discrimination or harassment, the employee can sue for damages.

Age Discrimination in Employment Act (ADEA)

The Equal Employment Opportunity Commission (EEOC) describes this Act as forbidding age discrimination against people who are age 40 or older.  The law forbids discrimination in any facet of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, benefits and any other term or condition of employment. While this act doesn’t protect employees under the age of 40, some states have established laws that protect younger workers from age discrimination. It’s important to know that it is not illegal for an employer to favor an older worker over a younger one, even if both employees are age 40 or older.  In recent years it has been legal and popular for employers to ‘buy out’ older employees by offering attractive severance packages to workers they wish to replace. If an employee accepts the package, they sign away their rights to sue for age discrimination.

Here are some requirements for employers that choose to take this path:

  • Workers must be given 21 days to review the agreement.
  • They have the right to review with an attorney at the cost of the employer.
  • Even after they have accepted the offer, they must be given 7 days to revoke the deal.
  • If you are letting two or more people go, you must give them 45 days to review and 7 days to revoke the deal if they choose to accept.

Americans With Disabilities Act (ADA)

According to the US Department of Justice, the ADA prohibits discrimination based on disability in employment, public accommodations, commercial facilities, transportation and telecommunications.

A person with a disability is defined by the ADA as:

  • An individual who has a physical or mental impairment that considerably limits one or more major life activities
  • A person with a history or record of such an impairment, or;
  • An individual who is perceived by others as having such an impairment.

In 2008, The Americans With Disabilities Amendments Act (ADAAA) was added to the original law. These amendments make important changes to the definition of the term disability. The purpose of this addition was to make it easier for an individual seeking protection under the ADA to establish that he or she has a disability.

Potential disabilities in the ADAAA include:

  • Alcoholism
  • Asthma
  • Depression
  • Cancer in remission

The Fair Labor Standards Act (FLSA)

According to the Department of Labor, the FLSA establishes minimum wage, overtime pay, record keeping and child labor standards.  Arguably the hottest topic surrounding the FLSA is wage & hour violations. Employers with the best intentions can improperly classify a worker as FLSA exempt and then fail to pay the overtime wages they’re due, leaving the organization open to potential penalties and litigation.  No matter the size of your business, the Department of Labor is keeping close watch on wage and hour violations. Think it can’t happen to you? Here are just a few examples of some businesses that were not spared the wrath of the DOL:

  • A Florida roofing company was required to pay $239,893 in back wages to 259 employees for overtime and recordkeeping violations
  • An Ohio restaurant was ordered to pay $118,354 in back wages and damages to a total of 21 workers
  • A Pennsylvania printing company was required to pay $1.45 million in back wages and damages

Family and Medical Leave Act of 1993 (FMLA)

The FMLA is a labor law requiring covered employers to provide employees with job-protected and unpaid leave for qualified medical and family reasons. Eligible employees are entitled to 12 workweeks of leave in a 12-month period for:

  • Pregnancy/ Birth of a child
  • Adoption
  • Foster Care placement of a child
  • Personal or family illness
  • Family military leave

The FMLA was introduced to balance the demands of the workplace with the needs of families. Should the FMLA be violated by an employer, workers can seek damages for lost wages and benefits, the cost of child care, plus an equal amount of liquidated damages unless an employer can show it acted in good faith and reasonable cause to believe it was not breaking the law.

Title VII of the Civil Rights Act of 1964

This federal law originally prohibited employers from discriminating against workers or applicants on the basis of sex, race, color, national origin and religion. Now protections for physical or mental disability, reprisal and sexual orientation have been included as well.

Employment Class Actions

Class actions brought on behalf of employees for wage and hour violations have been around for decades, but evidence is emerging hinting that these allegedly illegal practices by employers are becoming more prevalent than ever.  

U.S. federal law protects individuals from discrimination or harassment based on the following nine protected classes: sex, race, age, disability, color, creed, national origin, religion, or genetic information (added in 2008). Many state laws also give certain protected groups special protection against harassment and discrimination, as do many employer policies. Although it is not required by federal law, state law and employer policies may also protect employees from harassment or discrimination based on marital status or sexual orientation.  The following characteristics are “protected” by United States federal anti-discrimination law:

    Race – Civil Rights Act of 1964

    Religion – Civil Rights Act of 1964

    National origin – Civil Rights Act of 1964

    Age (40 and over) – Age Discrimination in Employment Act of 1967

    Sex – Equal Pay Act of 1963 and Civil Rights Act of 1964

    The Equal Employment Opportunity Commission interprets ‘sex’ to include discrimination based on sexual orientation and gender identity[2]

    Pregnancy – Pregnancy Discrimination Act

    Familial status – Civil Rights Act of 1968 Title VIII: Prohibits discrimination for having children, with an exception for senior housing. Also prohibits making a preference for those with children.

    Disability status – Rehabilitation Act of 1973 and Americans with Disabilities Act of 1990

    Veteran status – Vietnam Era Veterans’ Readjustment Assistance Act of 1974 and Uniformed Services Employment and Reemployment Rights Act

    Genetic information – Genetic Information Nondiscrimination Act

Individual states can and do create other classes for protection under state law.

To prevent class-action lawsuits, here are some established guidelines for what you cannot do during the hiring and firing process on the basis of  membership in a protected class:

  • Refuse to hire an individual
  • Segregate or force someone to segregate
  • Deny training to an individual
  • Fire or layoff an individual

If you have questions or would like more information, please contact David Daniels at [email protected].

Employers Beware: Payroll Mistakes Are Costly and Self-Audits Will Help Minimize Risk

Posted on: July 1st, 2019

By: Janet Barringer

A six-figure fine recently imposed on an employer by the Massachusetts Attorney General’s Office for wage & hour violation is an eye-opener for a few reasons. First, the financial penalty underscores employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay. Second, employers must communicate with their payroll providers on a regular basis to ensure all employees are coded with the correct rate of pay in compliance with all federal and state wage & hour laws. Third, errors by a payroll company are not necessarily defenses to the employer for inaccurate pay. Regularly conducting a self-audit is an important measure for the employer to help eliminate the risk of a wage & hour violation. A summary of the circumstances leading to one employer’s recent six-figure fine for wage & hour violation is as follows.

On May 23, 2019, Massachusetts Attorney General’s Office (the Commonwealth) imposed a fine of $250,000 on Eversource Energy Service Co. (“Eversource”) after concluding the company violated Massachusetts’ Wage & Hour Law. The Commonwealth determined Eversource underpaid approximately 3,000 of its workers. The Commonwealth’s investigation revealed Eversource paid many workers the incorrect rates for hourly, overtime, Sunday, nighttime, and emergency work. Eversource failed to enter codes for the differing rates in its payroll system, resulting in errors in processing the various hour and pay rates. Eversource discovered issues with its payroll system prior to the start of the Commonwealth’s investigation and had already undertaken efforts to fully compensate its employees when the investigation began. Such corrective measures did not absolve Eversource of liability.

Moreover, as a result of the Commonwealth’s investigation, Eversource conducted a comprehensive self-audit to determine the amount of underpayment, the number of employees impacted and whether wages remained outstanding. The audit revealed Eversource underpaid workers at least $828,000 from June to December 2016. The company paid back all amounts owed and allowed workers overpaid as a result of the payroll system errors to keep those funds. Eversource also agreed to pay the $250,000 fine to resolve the Commonwealth’s investigation.

Eversource’s implemented what turned out to be a faulty payroll system in 2016. The company claimed complexities of the software’s coding system caused errors in assigning rates of pay. Though Eversource made efforts to swiftly compensate employees incorrectly paid and cooperated with the Commonwealth’s investigation, Eversource nonetheless incurred a hefty fine. Moving forward, Eversource will work with its payroll technology provider to prevent this issue from reoccurring.

The recent investigation of Eversource and resulting financial penalty reveal employers must regularly examine their payroll systems to ensure all employees are coded with the correct rate of pay.  Even if employees are coded incorrectly due to an error on the part of the payroll provider, the employer is not necessarily shielded from liability. Accordingly, employers must communicate with their payroll providers on a regular basis in order to remain compliant with all federal and state wage & hour laws. Conducting regular self-audits should help the employer eliminate wage and hour violations.

If you have any questions or would like more information, please contact Janet Barringer in the National Labor & Employment Practice Section at [email protected].

80/20 Hindsight: The DOL Issues Opinion Letter That Concludes The 80/20 Side Work Rule For Tipped Employees No Longer Applies

Posted on: November 15th, 2018

By: Michael Hill

Navigating the laws for paying tipped employees just got a little easier. In a new opinion letter, the U.S. Department of Labor (“DOL”) effectively nullified the “80/20 Rule,” which divided courts throughout the country and became the anchor point for several collective and class actions against employers of tipped employees.

While the federal minimum wage is $7.25/hour, employers of tipped employees, such as waiters, bartenders, and bellhops, are permitted to pay such employees $2.13/hour and take a “tip credit” for the difference between this wage and the federal minimum wage (provided the employees receive notice and the tip credit does not exceed what they actually earn in tips).

The DOL’s 80/20 Rule acknowledged the fact that tipped employees may spend some time performing tasks that do not generate tips. Servers in a restaurant, for example, generally spend time performing “side work” that is incidental but related to serving customers, such as rolling silverware, making coffee, cleaning tables, or sweeping the dining room floor, in addition to waiting tables. Under the 80/20 Rule, an employer still could claim a tip credit for all of such an employee’s time, as long as the employee did not spend more than 20% of his or her time performing “general preparation work or maintenance.”

Strict application of the 80/20 Rule essentially meant employers of tipped employees were expected to monitor each and every task their employees performed and to maintain meticulous time logs accounting for each individual task. Some courts recognized this was infeasible, while others held this to be what the law required. The tide of litigation rolled in, with predictable swearing contests over whether servers and bartenders spent more than 20% of their time performing non-tip-generating tasks.

The DOL now, however, has recognized the confusion its 80/20 Rule generated and clarified that employers may take the tip credit for all of their tipped employees time, no matter how much time is spent on related “side work” tasks, so long as these side tasks are performed contemporaneously with the employees’ customer-service duties or within a reasonable time immediately beforehand or afterwards and the tasks are listed for that job position in the Occupational Information Network (O*NET).

If you have any questions or would like more information, please contact Michael Hill at [email protected].