Analysis

Will Barrett Tip Transport Worker Exemption Cases?

Law360 (September 29, 2020, 9:42 PM EDT) -- Seventh Circuit Judge Amy Coney Barrett's recent decisions limiting which types of workers can evade mandatory arbitration clauses or receive overtime pay raise questions on whether her elevation to the U.S. Supreme Court might tip the scales on hot-button issues involving transportation and gig-economy companies.

A conservative legal scholar who taught at the University of Notre Dame's law school and was appointed to the Seventh Circuit in 2017, Judge Barrett has a preference for strict textualism in statutory interpretation, and the handful of appellate rulings she has authored impacting the transportation sector suggest she embraces pro-business policies, experts say.

In two notable Seventh Circuit decisions issued just last month, Judge Barrett strictly limited a Federal Arbitration Act exemption that traditionally applies to interstate commerce workers and adopted a broad view of a Motor Carrier Act exemption that excludes certain workers from overtime pay benefits afforded by the Fair Labor Standards Act.

"Her decisions in GrubHub and Contract Transport Services, which required a statutory interpretation of the Federal Arbitration Act and Fair Labor Standards Act in interstate transportation cases, respectively, indicate that Judge Barrett has a strong grasp of the present transportation labor landscape," said Brad Hughes, a transportation litigation attorney at Clark Hill PLC. "As the gig economy continues to be litigated across the country, Judge Barrett's ability to see the distinctions between interstate/intrastate delivery drivers and local food delivery drivers should give some comfort to the transportation industry that they may have an ally on the Supreme Court."

Wallace v. GrubHub

Judge Barrett on Aug. 4 authored a unanimous panel decision shutting down an attempt by couriers and drivers for online food delivery company GrubHub to collectively pursue their wage-and-hour claims in court, sending them to arbitration instead. The panel determined that the drivers didn't qualify for the FAA's Section 1 exemption, which covers transportation workers who can prove they're engaged in interstate commerce.

Section 1 exempts from arbitration "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." But the statute doesn't define the phrase "engaged in foreign or interstate commerce" or specifically identify "class[es] of workers" — leaving those issues to be heavily litigated in numerous cases involving trucking companies, gig-economy companies like Uber, Lyft and GrubHub, and e-commerce giant Amazon.

The GrubHub drivers had argued that they carried goods that previously moved across state and even national lines, but the Seventh Circuit panel said that wasn't enough because "the workers must be connected not simply to the goods, but to the act of moving those goods across state or national borders."

"A package of potato chips, for instance, may travel across several states before landing in a meal prepared by a local restaurant and delivered by a GrubHub driver; likewise, a piece of dessert chocolate may have traveled all the way from Switzerland," Judge Barrett wrote. "The plaintiffs insist that delivering such goods brings their contracts with GrubHub within § 1 of the FAA. As they see it, the residual exemption is not so much about what the worker does as about where the goods have been."

In other words, the drivers' interpretation "would sweep in numerous categories of workers whose occupations have nothing to do with interstate transport — for example, dry cleaners who deliver pressed shirts manufactured in Taiwan and ice cream truck drivers selling treats made with milk from an out-of-state dairy," Judge Barrett said.

Legal experts have pointed out that the facts in the GrubHub cases were different from those that the Ninth and First Circuit recently considered when they decided the scope of the Section 1 exemption in favor of drivers who handled "last mile" deliveries for Amazon.

A Ninth Circuit majority's August decision in Rittmann followed the lead of a First Circuit panel's July decision in Waithaka , finding unequivocally that Amazon Flex drivers didn't have to physically cross state lines to be considered exempt from arbitration.

Both appellate courts zeroed in on the nature of Amazon's behemoth e-commerce and logistics business, and not just the specific activities of the Amazon Flex drivers themselves. Even purely local drivers handling deliveries in a single metropolitan area play a big enough role in the flow of interstate commerce to be exempt from arbitration, the panels said.

Amazon promptly filed petitions for en banc rehearings of both decisions, which the First and Ninth Circuit then denied, raising questions as to what might happen if Amazon decides to petition the Supreme Court for review.

Experts told Law360 that the Wallace , Rittmann and Waithaka decisions don't really create a circuit split on the Section 1 issue — even if Amazon will likely try to portray it as such — so chances are slim that the justices will take it up.

Shannon Liss-Riordan of Lichten & Liss-Riordan PC, who represents the plaintiffs in all three cases, said Judge Barrett actually cited Waithaka approvingly in the Wallace decision and distinguished GrubHub drivers from Amazon drivers.

"So I don't read her decision in Wallace as undermining Waithaka and Rittmann," Liss-Riordan said. "I think she just didn't apply the principles correctly in the Wallace case."

Glenn Danas, an appellate and employment law partner with Robins Kaplan LLP, said there isn't "tension" among the three decisions, given that Judge Barrett focused the Seventh Circuit's analysis on the channels of commerce in which the GrubHub delivery drivers were involved, which differed from the channels in which the Amazon Flex drivers operated.

"Judge Barrett's opinion in Wallace, of course, focuses solely on the text of the FAA, and not on the issue of whether a product has come to rest, which seems to be the key factor in determining how these cases come out," Danas said. "And despite the fact that Wallace and Waithaka/Rittmann can be harmonized, I suspect Amazon's potential certiorari petitions will focus on these decisions creating a circuit split that justifies review."

"If the court were to take such a petition up, it seems likely it would be in order to further limit the Circuit City v. Adams interpretation of the FAA Section 1's exemption," he continued, referring to the high court's 2001 decision that limited Section 1 to transportation workers who are actually engaged in the movement of goods in interstate commerce. "In any event, if Judge Barrett is confirmed, it seems clear that this will bode ill [for] plaintiffs on these Section 1 exemption arguments when one next reaches the Supreme Court."

Steven Katz, a partner at Constangy Brooks Smith & Prophete LLP who defends employers in litigation, said Judge Barrett's elevation to the Supreme Court won't change "one bit" the likelihood of the justices taking up the Section 1 questions raised in Wallace, Rittmann and Waithaka.

"There was next to no chance that the court would have granted certiorari on the question when Justice [Ruth Bader] Ginsburg was on the court, and there still is next to no chance it will," Katz said, emphasizing that all three decisions apply the same textualist principles to conclude that being "engaged in ... commerce" means you'd have to be "connected ... to the act of moving those goods across borders."

"It is not enough to simply pick up an item that has so moved and put it down somewhere else," Katz said. "You have to be part of the process of travel across borders to the item's place of rest for use. The difference in outcome between the GrubHub and Amazon cases is due to the different facts."

"I see no conflict among the circuits for the Supreme Court to resolve, and don't foresee one arising," Katz continued. "Future Section 1 battles will be factual, and highly unlikely to generate splits that a Supreme Court would be interested in addressing."

But some experts say it's possible that the Supreme Court might, in fact, take up the Section 1 issue again after last addressing it in the January 2019 New Prime ruling. The decision primarily drilled down on what the phrase "contracts of employment" means and, more importantly, what Congress intended that term to cover when it enacted the FAA in 1925. It didn't precisely define the phrase "engaged in foreign or interstate commerce," nor did it elaborate on "class[es] of workers" covered by the exemption.

"The circuit split makes this issue ripe for review. I would have been worried about that given the composition of the court even before Justice Ginsburg's death," said Christian Schreiber of Olivier Schreiber & Chao LLP, which represents class action plaintiffs. "But given the fact that Judge Coney Barrett authored the Seventh Circuit's GrubHub opinion, and given that she describes herself as an acolyte of Justice [Antonin] Scalia, I would not be optimistic about the outcome. Despite professions of 'originalism,' Justice Scalia showed himself to be results-driven when the issue suited him."

"This particular issue is ripe with irony, given how that the framers privileged the right to a jury. I'm not sure how much it matters that corporatist decisions are 5-4 or 6-3, which seems a likely outcome," Schreiber added. "The Supreme Court's arbitration jurisprudence has been weaponized to strip workers and consumers of rights the framers would have considered fundamental. I would expect that to continue until Congress resets the balance of power."

The cases are Carmen Wallace et al. v. GrubHub Holdings Inc. et al., case number 19-1564, and Thomas Souran et al. v. GrubHub Holdings Inc. et al., case number 19-2156, in the U.S. Court of Appeals for the Seventh Circuit.

Burlaka v. Contract Transport Services

Judge Barrett on Aug. 21 authored a panel decision rejecting an FLSA suit seeking overtime pay that was filed by a group of truck drivers against Contract Transport Services LLC, a Wisconsin-based truckload transportation services company. 

Judge Barrett examined the connection between the drivers' "spotting" duties, which involved transporting loaded or empty truck trailers over short distances in and around clients' facilities, and the interstate shipment of the goods they carried. She concluded that the drivers could be reasonably expected to drive intrastate routes that were part of a continuous interstate journey, which means they fall under a Motor Carrier Act exemption and aren't entitled to overtime pay under the FLSA.

"The plaintiffs seem to imagine that a continuous journey must resemble a relay race, in which the next driver immediately picks up exactly where the other left off. But that is neither how interstate shipments work nor what the MCA requires," Judge Barrett wrote.

Richard Reibstein, a partner with Locke Lord LLP and co-head of its independent contractor misclassification and compliance practice, said Judge Barrett's Wallace opinion was consistent with a limited application of the FAA's Section 1, but her decision in the Burlaka case was based on an "expansive application of the Motor Carrier Act exemption from the FLSA."

"The one consistency in those two recent decisions is that Judge Barrett decided both in favor of the business defendants. But one should not jump [to] the conclusion that Judge Barrett favors businesses," Reibstein said. "The issues in those cases were straightforward and the arguments advanced by the plaintiffs' lawyers were a stretch."

"If anything, one can fairly conclude from these recent FLSA cases that Judge Barrett would not feel comfortable expanding the contours of the law," he said. "That is consistent with the notion of judicial restraint."

The case is Leonid Burlaka et al. v. Contract Transport Services LLC, case number 19-1703, in the U.S. Court of Appeals for the Seventh Circuit.

--Editing by Breda Lund and Jill Coffey.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Carmen Wallace, et al v. Grubhub Holdings, Inc., et al


Case Number

19-1564

Court

Appellate - 7th Circuit

Nature of Suit

3710 Fair Labor Standards Act

Date Filed

March 28, 2019


Case Title

Leonid Burlaka, et al v. Contract Transport Services LL


Case Number

19-1703

Court

Appellate - 7th Circuit

Nature of Suit

3710 Fair Labor Standards Act

Date Filed

April 16, 2019


Case Title

Thomas Souran, et al v. Grubhub Holdings, Inc., et al


Case Number

19-2156

Court

Appellate - 7th Circuit

Nature of Suit

3710 Fair Labor Standards Act

Date Filed

June 17, 2019

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