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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. 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. 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.” 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.” 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.
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.
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].
 Rittmann v. Amazon.com, Inc. (9th Cir. 2020), Case No. 19-35381.
 Rittmann v. Amazon.com, Inc. (W.D.Wash. 2019) 383 F. Supp. 3d 1196.
 9 U.S.C. § 1 (emphasis added).
 Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 118-119.
 Waithaka v. Amazon.com, Inc. (1st Cir. 2020) 966 F.3d 10.
 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.