RITTMANN V. AMAZON.COM: A WRONG TURN FOR GIG WORKERS LOOKING FOR CLARITY IN THE FEDERAL ARBITRATION ACT

By Zach Krenz, Volume 105 Staffer

The Federal Arbitration Act (FAA) makes arbitration clauses enforceable. Section 2, which outlines the breadth of the Act, states that arbitration provisions in contracts “involving commerce . . . shall be valid, irrevocable, and enforceable. . . .”[1] Section 1 of the Federal Arbitration Act exempts certain categories of workers from the FAA’s otherwise broad reach. Section 1 states that the FAA “shall not apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”[2]

In Rittman v. Amazon.com, a divided Ninth Circuit panel held that certain Amazon delivery workers—the plaintiffs—were exempt from the FAA, per § 1, because they were a class of workers engaged in interstate commerce.[3] Consequently, the plaintiffs were not required to arbitrate their claims alleging violations by Amazon of various labor laws,[4] even though some had agreed to mandatory arbitration to settle disputes.[5] In response, Amazon filed a petition for certiorari, which is currently pending.[6]

This Post first analyzes Rittmann. Next, this Post discusses the difficulty of applying Rittmann to similar cases, and it concludes by recommending that the Supreme Court grant certiorari to clarify the application of the § 1 exception to gig workers who make local deliveries.

I. RITTMANN V. AMAZON.COM

Amazon Flex (AmFlex) drivers complete the “last mile” of a delivery by using their personal vehicles to pick up packages at a local Amazon warehouse and deliver them to their final destinations.[7] Though AmFlex workers agree to settle disputes in arbitration,[8] the arbitration clause is not enforceable if the AmFlex workers are exempted from the FAA by the residual clause in § 1.[9]

In Circuit City Stores, Inc. v. Adams, the Supreme Court held that the residual clause of § 1 does not exempt all employment contracts from the FAA, but rather exempts employment contracts only for transportation workers.[10] The Court distinguished between the broad “involving commerce” of § 2—which implies the full extent of Congress’s power under the Commerce Clause—and the narrower “engaged in . . . interstate commerce” of § 1, which reaches less than Congress’s full Commerce Clause powers.[11] The upshot of Circuit City is that § 1 does not exempt all categories of workers that Congress could otherwise exempt using the full breadth of the Commerce Clause; instead, § 1 is limited to transportation workers. Circuit City does not address, however, whether the phrase “interstate commerce” in § 1 includes practically all commerce, in accordance with modern Commerce Clause doctrine,[12] or whether it is also narrowed somehow. This is the issue Rittmann addresses.

The Ninth Circuit held that § 1 covers AmFlex workers because they complete the final leg of Amazon’s continuous interstate package delivery service. The court relied on the meaning of the words when the FAA was enacted,[13] the use of the words in other statutes,[14] and an almost identical First Circuit case.[15] It would seem, then, that the Ninth Circuit interpreted § 1—though limited to transportation workers—to otherwise be commensurate with Commerce Clause powers. But the court didn’t do this; instead, it held that some local deliverers—like AmFlex drivers—are covered by § 1, but it distinguished AmFlex drivers from other gig economy transportation workers, like Grubhub drivers.[16]

To do this, the Ninth Circuit distinguished from the Seventh Circuit’s 2020 decision in Wallace v. Grubhub Holdings, Inc.,[17] written by then-Judge Barrett. In Wallace, the Seventh Circuit held that Grubhub drivers were not engaged in interstate commerce pursuant to § 1 and were therefore not exempt from the FAA.[18] Accepting the Seventh Circuit’s decision and trying to distinguish it from the issue of AmFlex drivers, the Ninth Circuit stated that Grubhub drivers, unlike AmFlex drivers, were not engaged in interstate commerce because the meals that they delivered were not “indisputably part of the stream of commerce.”[19] Furthermore, Grubhub drivers transported goods for local companies, unlike AmFlex drivers who transported goods for Amazon, a national company.[20]

The Ninth Circuit, then, forged a middle road for the § 1 exception. On the one hand, § 1 is narrowed, in the spirit of Circuit City, so as not to cover Grubhub drivers. On the other hand, § 1 still exempts some intrastate transportation workers, like AmFlex drivers. To determine whether an intrastate transportation worker is covered, the court relied on the following considerations: whether the intrastate delivery is part of continuous interstate transportation;[21] whether the delivered goods—with ingredients and parts that were part of interstate commerce—were transformed into something else, so that the intrastate delivery of the final product was not interstate commerce;[22] and whether the nature of the business shipping the goods is national or local.[23]

Judge Bress, dissenting and siding with Amazon, argued that whether § 1 exempts a class of transportation workers depends on whether that class crosses state lines during deliveries.[24] Using Circuit City, he rejected, like the majority, the option that § 1’s “interstate commerce” is commensurate with the full extent of Congress’s power under the Commerce Clause.[25] He also rejected the majority’s decision to include some intrastate transportation workers and exclude others, insisting that such an approach would lead to difficult problems of application and inequities among delivery workers who do the same work.[26] Instead, he opted for the narrowest exception, arguing that § 1 exempts only transportation workers that cross state lines.[27]

II. RITTMANN IS UNWORKABLE, AND THE SUPREME COURT SHOULD GRANT CERTIORARI TO CLARIFY THE APPLICATION OF § 1 TO GIG WORKERS WHO MAKE LOCAL DELIVERIES

Both majority and dissent in Rittmann argued about the intent of the enacting Congress in 1925. Let’s assume, however, that the historical record could go either way, and that present-day workability and Circuit City are the only considerations. In that case, the dissent wins. The majority’s approach is unpredictable, since its line drawing between certain groups of transportation workers is unclear; and it has, in only a few months, shown itself difficult to apply in similar cases.

As a hypothetical, how would a court, applying Rittmann, decide whether a grocery deliverer, like a Shipt[28] driver, is “engaged in . . . interstate commerce,” per § 1? A court could decide either (1) that a Shipt driver is not engaged in interstate commerce—unlike an AmFlex worker—and reason that the nature of Shipt is local, whereas AmFlex is national, even though Shipt is owned by Target[29]; or (2) that a Shipt worker is engaged in interstate commerce—unlike a Grubhub worker—and reason that the transformation of the product, i.e., the difference between food from a restaurant and a grocery store, is dispositive, even though a consumer can buy prepared meals via Shipt[30] and unprepared food via Grubhub.[31] Either decision is in tension with Rittman.

For an example from the Ninth Circuit following Rittmann, consider Edmond Carmona v. Dominos Pizza LLC.[32] In that case, Dominos truck drivers delivered various products—like prepared cheeses, boxes, and doughs—from Dominos facilities to franchise locations in the same state. On the one hand, the products were (in a sense) prepared at the in-state facilities, and the nature of Domino’s business seems to be more like a pizza company than a distribution company. Nevertheless, the district court applied Rittman to hold that § 1 covered the truck drivers, finding that truck drivers were more like AmFlex workers than Grubhub workers.[33]

For another case, consider In re Grice, a case addressing Uber drivers who transported passengers from one airport to another airport, in accordance with an agreement between Uber and the airports.[34] The district court held that the drivers were not engaged in interstate commerce, and a Ninth Circuit panel held that the district court’s decision was not “clearly erroneous as a matter of law.”[35] The panel stated that the decisions related to AmFlex workers, like Rittman, were limited to AmFlex drivers, not gig-economy drivers in general.[36]

In sum, tension is growing in the lower courts regarding how to apply the § 1 exception of the FAA to gig-economy drivers who make local deliveries. In Rittman, a Ninth Circuit panel made a distinction between AmFlex drivers and Grubhub drivers. This distinction has been hard to apply in subsequent cases and inadequate for foreseeable issues. Accordingly, the Supreme Court should grant certiorari in Rittman and clarify the reach of § 1. In doing so, the Court should hold that § 1 applies to all transportation workers that Congress can reach pursuant to its Commerce Clause powers (effectively cabining Circuit City to the proposition that § 1 applies not to all employment contract, but just to transportation workers). Alternatively, the Court should follow Judge Bress’s dissent, and hold that § 1 applies to transportation workers who cross state borders, extending Circuit City’s narrowing of § 1. The Ninth Circuit’s middle road will not hold, and the issue will have to be clarified at some time or another.

 

[1] 9 U.S.C. § 2.

[2] 9 U.S.C. § 1.

[3] Rittmann v. Amazon.com, Inc., 971 F.3d 904, 919 (9th Cir. 2020).

[4] The amended complaint alleged violations by Amazon of the Fair Labor Standards Act of 1938, the California Labor Code, and Washington and Seattle labor laws. Id. at 908.

[5] Id. at 907–08.

[6] Petition for Writ of Certiorari, Amazon.com, Inc. v. Rittmann (No. 20-622).

[7] Rittmann, 971 F.3d at 907.

[8] Id. at 907–08. Though AmFlex workers can opt out of arbitration, one of the plaintiffs failed to do so. Id.

[9] The “residual clause” is the following bolded portion of the § 1 exception: The FAA “shall not apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1.

[10] Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001).

[11] Id. at 115–16. The Court also relied on the pro-arbitration purpose of the FAA and the canon of statutory interpretation stating that the residual clause should be similar to other categories in the list. Id. at 111–12, 115.

[12] See Wickard v. Filburn, 317 U.S. 111 (1942).

[13] Rittmann v. Amazon.com, Inc., 971 F.3d 904, 910 (9th Cir. 2020).

[14] Id. at 911–13.

[15] The First Circuit case was Waithaka v. Amazon.com, Inc., 966 F.3d 10 (1st Cir. 2020).

[16] Rittmann, 971 F.3d at 916–17.

[17] Wallace v. Grubhub Holdings, Inc., 970 F.3d 798 (7th Cir. 2020).

[18] The Seventh Circuit, following Circuit City’s admonition that § 1 be “afforded a narrow construction,” held that, to fall in the exception, “the workers must be connected not simply to the [interstate] goods, but to the act of moving those good across state . . . borders.” Id. at 802.

[19] Rittmann, 971 F.3d at 916.

[20] Id. at 917–18.

[21] Id. at 916 (“AmFlex drivers’ transportation of goods wholly within a state are still a part of a continuous interstate transportation . . . .”).

[22] Id. at 916–17; see also id. at 929 (Bress, J., dissenting).

[23] Id. at 917.

[24] Id. at 925–28 (Bress, J., dissenting).

[25] Id. at 924–25.

[26] Id. at 930–31 (Bress, J., dissenting).

[27] Id. at 925–28.

[28] Through the Shipt app, buyers place orders at local grocery stores. Shipt workers view, select, and fulfill these orders using their personal vehicles. About Shipt, Shipt, https://www.shipt.com/about/ [https://perma.cc/99BS-AZ73] (last visited Jan. 15, 2021).

[29] Shipt, Crunchbase, https://www.crunchbase.com/organization/shipt-2 [https://perma.cc/6FMN-X4LM] (last visited Jan. 15, 2021).

[30] As E-Commerce Rises, Grocers Grapple with Prepared Food Delivery, Grocery Dive, https://www.grocerydive.com/news/as-e-commerce-rises-grocers-grapple-with-prepared-food-delivery/556655/ [https://perma.cc/8732-WP2A] (last visited Jan. 15, 2021) (“Some grocers are ready to test delivery for made-to-order prepared foods. Grocery delivery company Shipt told Grocery Dive that several of its partners are adding foodservice items online.”).

[31] Grubhub drivers can deliver unprepared goods from local restaurants, including cans of soda or prepackaged deserts.

[32] Carmona v. Dominos Pizza LLC, No. 20-01905, 2020 WL 7979174 (C.D. Cal. Dec. 9, 2020).

[33] Id. at *4.

[34] In re Grice, 974 F.3d 950 (9th Cir. 2020).

[35] Id. at 958–59.

[36] Id. at 957.