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Appeals court agrees Amazon can’t force Flex drivers into arbitration

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Amazon has lost another case in which it tried to compel dissatisfied workers into arbitration rather than litigation, with Amazon Flex drivers again at the heart of the dispute.

Just a few weeks after a New Jersey state case that held an AmFlex driver couldn’t be forced into arbitration under the Federal Arbitration Act, there is now another federal court case that says much the same thing. In the decision handed down Wednesday, the U.S. Court of Appeals for the 9th Circuit echoed the New Jersey case in saying that the AmFlex drivers, though they are making last-mile deliveries and never leave the state, in this case California, are part of an activity that can be deemed interstate commerce. 

As a result, a divided court said, the AmFlex drivers fall under a provision of the Federal Arbitration Act that exempts certain workers engaged in interstate commerce. 

There were numerous plaintiffs in the original case that was filed over the question of whether the workers were employees or independent contractors. In that case, a lower court ruled against Amazon’s attempt to compel arbitration rather than litigation. 

AmFlex allows individuals to make Amazon deliveries using their own vehicles (or, as the decision notes, by bicycle or foot if that’s feasible.) The appeals court, in reviewing the job duties of the AmFlex drivers, noted that drivers can occasionally cross state lines but rarely do so. But that fact was not relevant to the court’s decision. 

One of the named plaintiffs in the case, Raef Lawson, chose not to opt out of the arbitration portion of the terms of service that would require arbitration to settle disputes. In 2016, he and the other defendants filed their lawsuit regarding the question of contractor vs. employee classification. That question was not settled as a result of the recent court case.

Amazon tried to compel Lawson to go to arbitration rather than to court, citing the terms of service signed by Lawson. The lower court denied that attempt by Amazon and the appeals court now has upheld it.

Similar to the decisions in other cases, the lower and appeals courts noted that the FAA “exempts certain contracts from its scope, specifically the employment contracts of ‘seamen, railroad employees and any other class of workers engaged in foreign or interstate commerce.’”

“This appeal requires us to decide whether the AmFlex delivery providers in this case fall within the scope of the exemption,” the appeals court wrote. “Because we conclude that they do, and thus that their employment contracts are not subject to the FAA, we consider and reject Amazon’s further arguments that there is nevertheless a valid and enforceable arbitration agreement between the parties.”

While it may seem odd that an AmFlex driver dropping parcels off only in the Los Angeles area could be considered part of interstate commerce, the court cited precedents that said the tail end of a supply chain that crossed state lines could be considered part of interstate commerce. The appeals court decision looks at various definitions of commerce and interprets them like this: “The ordinary meaning of those words does not suggest that a worker employed to deliver goods that originate out of state to an in-state destination is not ‘engaged in commerce’ any less than a worker tasked with delivering goods between states.”

In a commentary on the decision, the trucking-focused law firm of Scopelitis Garvin Light Hanson & Feary noted that there have been three recent cases on the issue of last-mile drivers and their relationship to the FAA. In two of them, including the recently decided Lawson case, AmFlex drivers were ruled to be exempt from the FAA. But in another recent case, an appeals court in the 7th Circuit ruled that the FAA can be enforced against GrubHub drivers and that they are not part of an interstate commerce chain that would exempt them from the act. 

Scopelitis noted that there was a dissenting opinion in the just-decided Lawson case. “Given the possibility of a ‘split’ emerging among circuit courts on the scope of the exemption, and the vocal dissent in [this] opinion from the 9th Circuit, we anticipate one or more of these cases will be appealed to the U.S. Supreme Court,” Scopelitis wrote.

But the Scopelitis analysis goes on to say it is not certain that the high court will take up the case, having already handed down an arbitration ruling in the New Prime cases. Early last year, in another contractor vs. employee dispute, the court ruled in favor of a driver for New Prime who sought to avoid arbitration. (Litigation in the case ultimately ended in a recent settlement.)

Although the New Jersey case is in that state’s legal system, rather than the federal system, judges there ruled in a similar manner — the FAA does not apply to an AmFlex driver because of the law’s provisions on interstate commerce. 

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.