From JDSupra, Richard Reibstein discusses two cases this month — in one of them, Lyft drivers were required to arbitrate their claims while in the other, trucking companies in California must comply with the ABC test. Richard writes;
April 2021 was a meaningful month for two industries that are hardly strangers to lawsuits involving the status of workers as independent contractors. A federal district court in the District of Columbia issued an extremely favorable decision for Lyft, holding that a driver and members of a class action are not covered by the interstate transportation worker exemption from arbitration under the Federal Arbitration Act, even though drivers in a locality such as D.C. often drive in interstate commerce. The court concluded that the arbitration exemption in the FAA must be determined by reference to all drivers providing services to a company’s customers nationally, not locally, and found that crossing state lines is not commonplace among Lyft drivers in most locations where Lyft operates. Meanwhile, in an appellate decision by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit, two of the three panel judges determined that a federal transportation law with a strong preemption clause does not preempt the California ABC test. The dissenting judge disagreed, finding that the ABC test is precisely the type of state law that the federal transportation law was designed to preempt. Because one judge dissented, the full Ninth Circuit is likely to consider the panel decision. If the full appellate court affirms, the Supreme Court may well grant cert and determine this issue because the Ninth Circuit decision is directly at odds with a First Circuit ruling involving an identical Massachusetts law.
FEDERAL ARBITRATION ACT EXEMPTION FOR INTERSTATE TRANSPORTATION WORKERS TO BE VIEWED ON A NATIONAL NOT LOCAL BASIS. A federal district court has found that a Lyft driver must arbitrate her claims that Lyft engaged in a continuous violation of District of Columbia law by failing to provide sick leave during the COVID-19 pandemic. Lyft argued that the Federal Arbitration Act (FAA) required the court to enforce the arbitration agreement by compelling the driver to submit the dispute to individual arbitration. The plaintiff argued that the FAA did not apply to her agreement with Lyft because the FAA excludes from arbitration any “class of workers engaged in…interstate commerce.” In granting Lyft’s motion to compel arbitration, the court concluded that the exemption is not limited to transportation workers who transport goods rather than people, but the relevant “class of workers” must be assessed at a nationwide level rather than a specific geographic area. In rejecting the driver’s argument that the applicable “class of workers” are those drivers in and around the District of Columbia servicing other states, the court concluded that “[u]nlike seamen and railroad workers, for whom the interstate movement of goods and passengers over long distances across state lines is ‘a central part of the job description,’ Lyft drivers offer services that are primarily local and intrastate in nature.” The court described Lyft drivers as “in the business of giving people rides, not the particular business of offering interstate transportation to passengers.” Osvatics v. Lyft, Inc., No. 1:20-cv-01426 (D.D.C. Apr. 23, 2021).
NINTH CIRCUIT HOLDS THAT FEDERAL TRANSPORTATION LAW DOES NOT PREEMPT CALIFORNIA INDEPENDENT CONTRACTOR TEST. Two of three judges on a panel of the U.S. Court of Appeals for the Ninth Circuit reversed a California district court’s preliminary injunction barring the state from enforcing AB5 and its ABC test for IC status against any motor carrier doing business in California. The majority of the panel held that the application of AB5 is not preempted by the Federal Aviation Administration Authorization Act (FAAAA). The FAAAA preempts any state law “related to a price, route, or service of any motor carrier…with respect to the transportation of property.” The California Trucking Association (CTA), a trade association representing motor carriers that engage independent contractors who own their own trucks, and two independent owner-operators commenced the suit originally seeking to enjoin the enforcement of AB5. The CTA viewed Prong B of the new ABC test in California, which statutorily classifies a worker as an employee unless it is demonstrated that the worker performs “work that is outside the usual course of the hiring entity’s business”, as “effectively precluding the business model employed by CTA’s members.” After the district court enjoined the state from enforcing AB5 against any motor carrier doing business in California, the State and the International Brotherhood of Teamsters (purportedly representing owner-operators) filed an appeal. On review, the Ninth Circuit panel majority concluded that the district court abused its discretion in issuing the injunction: “because AB5 is a generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind, compel, or otherwise freeze into place the prices, routes, or services of motor carriers, it is not preempted by the FAAAA.” The dissenting judge, finding that AB5 both affects the motor carriers’ relationship with their workers and significantly impacts the services that motor carriers provide to their customers, concluded that the new law is preempted as applied to CTA’s members. Additionally, he reasoned that because the ABC test requires an employer to hire employees, rather than engage independent contractors, applicable case law “compels us to conclude that AB5 is related to the prices, routes, and service of a motor carrier [and should, therefore, be preempted].”
In an April 29, 2021 Employment Law360 article entitled, “Trucking Industry Braces after 9th Circuit Preemption Loss,” the publisher of this blog was quoted as follows: “This decision is hardly dispositive. On any three-member panel decision that includes a dissent, en banc consideration is likely, especially in a case like this that has outsized significance to a critical industry like trucking. In fact, the dissent pointed out that the Ninth Circuit majority’s decision deviates from the First Circuit’s 2016 decision in Schwann v. FedEx , which found that Prong B of Massachusetts’ ABC test was preempted by the FAAAA. The Massachusetts ABC test is virtually identical to the ABC test in California. No other state’s ABC test is like those in California and Massachusetts, so decisions on FAAAA preemption applying different ABC tests by other circuit courts, such as the Third and Seventh circuits, are like comparing apples and oranges.” Calif. Trucking Ass’n v. Bonta, No. 20-55106 (9th Cir. Apr. 28, 2021).