Couriers who handle local, intrastate deliveries are not exempt from the Federal Arbitration Act and can be required to arbitrate disputes because they are not engaged in foreign or interstate commerce, a federal appeals court has ruled.
The decision is a significant win for employers who use delivery drivers to conduct business.
In Immediato v. Postmates, Inc., a group of Postmates meal delivery drivers in the greater Boston area sued in Massachusetts state court.
Postmates drivers are required to sign the company’s “Fleet Agreement.” That agreement classifies couriers as independent contractors and includes a mutual arbitration provision that states that all disputes must be resolved through final and binding arbitration.
The drivers claimed that they were misclassified as independent contractors and, as a result, that they were entitled to additional benefits and protections under Massachusetts law, such as sick leave, minimum wage and reimbursement of business expenses.
Postmates removed the case to U.S. District Court and moved to compel arbitration. The couriers then claimed that as transportation workers, they were exempt from the FAA.
The district court ruled that the couriers were not exempt and granted Postmates’ motion to compel arbitration. The couriers appealed.
The 1st U.S. Circuit Court of Appeals affirmed.
Citing U.S. Supreme Court precedent, the court said that the so-called transportation worker exemption only applies to workers who are actively engaged in moving goods across borders through channels of foreign or interstate commerce.
It said that workers must play a necessary role in the free flow of goods across state or international borders in order to be exempt from the arbitration requirement.
In this case, the court said that the couriers were not engaged in foreign and interstate commerce because almost all orders they handled were in state.
The court went on to explain that while the items the couriers delivered might have travelled across state lines at some point, their movement in interstate commerce ended when they were received by the restaurants or stores from which the couriers picked them up.
At that point, the meals or other products become part of an intrastate transaction.
The court noted that this example is different from a situation in which an online retailer ships a package across state lines and the final leg of the delivery is completed by a local courier. In an example like that, the local driver engages in interstate commerce because they play a direct role in the broader interstate transit of the goods.