Fifth Circuit: FAA Section 1 Does Not Exempt Local Delivery Drivers

This article first appeared on the Securities Arbitration Alert Blog, here.

Houston area delivery drivers who generally did not cross state lines were not of the class of workers exempt from FAA coverage

Whether the Federal Arbitration Act (“FAA”) section 1 exemption extends to local delivery drivers was left open by SCOTUS when it decided Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (Jun. 6, 2022). To review, FAA section 1 exempts from the Act: “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Recall that the Court on June 6 ruled unanimously in Southwest that the exemption of “workers engaged in foreign or interstate commerce” includes classes of workers who are part of the flow or stream of interstate commerce, and that there is no FAA requirement that these individuals actually cross state lines.

Question Left Open

The SCOTUS decision in Southwest was narrow, and specifically did not embrace the issue of FAA coverage of local delivery drivers. For example, the Justices state: “We recognize that the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders. Compare, e.g., Rittmann v. Amazon.com, Inc., 971 F. 3d 904, 915 (CA9 2020) (holding that a class of ‘last leg’ delivery drivers falls within §1’s exemption), with, e.g., Wallace v. Grubhub Holdings, Inc., 970 F. 3d 798, 803 (CA7 2020) (holding that food delivery drivers do not). In any event, we need not address those questions to resolve this case.”

Recent Petition Raised the Unresolved Issue

We reported in SAA 2022-01 (Jan. 13) Carmona v. Domino’s Pizza, LLC, No. 21-55009 (9th Cir. Dec. 23, 2021), petition for reh’g den. (Feb. 15, 2022), where a unanimous Ninth Circuit embraced the “stream” or “flow” of interstate commerce doctrine. Said the Opinion: “Domino’s sells pizza to the public primarily through franchisees. Domino’s buys various goods, such as mushrooms, that are used by its franchisees in making pizzas, from suppliers outside of California. Those goods are then delivered by third parties to the Domino’s Southern California Supply Chain Center (‘Supply Center’). At the Supply Center, Domino’s employees reapportion, weigh, package, and otherwise prepare the goods to be sent to franchisees. Domino’s franchisees in Southern California order the goods either online or by calling the Supply Center, and the plaintiff drivers (‘D&S drivers’), who are employees of Domino’s, then deliver the goods to the franchisees.” Crossing state lines was not part of the drivers’ job.” A June 15 Certiorari Petition in Domino’s Pizza, LLC v. Carmona, No. 21-1572 presents this question:

“Whether drivers making solely in-state deliveries of goods ordered by in-state customers from an instate warehouse are nevertheless a ‘class of workers engaged in foreign or interstate commerce’ for purposes of Section 1 of the Federal Arbitration Act simply because some of those goods crossed state lines before coming to rest at the warehouse?”

In the Meantime, the Fifth Circuit Weighs In

The Court in Lopez v. CintasNo. 21-20089 (5th Cir. Aug. 30, 2022), declines to extend the FAA exemption to local delivery drivers:

“Douglas Lopez was a local delivery driver for Cintas Corporation. That means he picked up items from a Houston warehouse (items shipped from out of state) and delivered them to local customers…. The relevant class of workers here do not have such a ‘direct and necessary role’ in the transportation of goods across borders. Giving § 1 ‘more limited reach’ means limiting its applicability to those ‘actively engaged in transportation of those goods across borders,’ which is something the class of local delivery drivers here simply does not do. Id. (quotation omitted). Once the goods arrived at the Houston warehouse and were unloaded, anyone interacting with those goods was no longer engaged in interstate commerce. And unlike either seamen or railroad employees, the local delivery drivers here have a more customer-facing role, which further underscores that this class does not fall within § 1’s ambit. See Saxon, 142 S. Ct. at 1791. As a result, the transportation-worker exemption does not apply to this class of local delivery drivers.”

(ed: Domino’s will be considered at the Court’s September 28 conference. Whether it’s this case or another, we think the Court will ultimately take up this issue, both for delivery drivers and rideshare drivers for companies such as Uber or Lyft.)

author

George Friedman

George H. Friedman is the publisher and Editor-in-Chief of the Securities Arbitration Alert, a weekly online publication covering the latest developments in financial services arbitration and mediation. He is also the principal of George H. Friedman Consulting, LLC, providing expert advice on arbitration and mediation in general and the FINRA…

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