Chicago Business Litigation Lawyer Blog
Delivery drivers for an online food delivery service sued the platform alleging violations of the Fair Labor Standard Act for failing to pay overtime. The delivery service sought to compel arbitration, which the drivers had agreed to in their employment agreements. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act, though the district court disagreed. The appellate panel found that the plaintiffs had completely ignored the governing framework and that being “engaged in commerce” and “involved in commerce” were two completely different concepts. The panel found that the § 1 exemption of the FAA was therefore narrowly tailored and that it was not unusual that the employment agreement failed to meet § 1’s more stringent requirement while still meeting the far broader requirements of § 2. The panel determined that the plaintiffs were not entitled to the exemption and it affirmed the decision of the district court
Grubhub is an online and mobile food-ordering and delivery marketplace. Grubhub provides a platform for diners to order takeout from local restaurants, either online or via its mobile app. When a diner places an order through Grubhub’s app, Grubhub transmits the order to the restaurant, which then prepares the diner’s meal. Once the food is ready, the diner can either pick it up themselves or request that Grubhub dispatch a driver to deliver it to her.
Grubhub considers its drivers to be independent contractors rather than employees. Several drivers who worked in cities including Chicago, Portland, and New York filed two suits against Grubhub, alleging violations of the Fair Labor Standards Act for failing to pay overtime. The suits hit a roadblock, however, as the drivers had signed agreements compelling arbitration. The workers attempted to argue that they were engaged in foreign or interstate commerce and therefore were exempt from the Federal Arbitration Act. The district courts disagreed and compelled arbitration. The plaintiffs then appealed, and the 7th Circuit consolidated the appeals.
The appellate panel began by noting that § 1 of the FAA provides that the FAA does not apply to contracts of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce. Citing Bacashihua v. U.S. Postal Serv., the panel then stated that, to determine whether the exemption applied, it must decide not whether the individual workers were engaged in interstate or foreign commerce, but whether they belonged to a class of workers that was so engaged. The panel then stated that it and its sister circuits had repeatedly emphasized that transportation workers are those who are “actually engaged in the movement of goods in interstate commerce.”
The panel then stated that the plaintiffs in the instant appeal completely ignored the relevant governing framework. Citing Circuit City Stores, Inc. v. Adams, the panel stated that the Supreme Court had stated that being “engaged in commerce” and “involved in commerce” were not equivalent and that the § 1 exemption from the FAA was therefore narrowly tailored. The panel stated that there was therefore nothing remarkable about an employment contract failing to meet § 1’s more stringent “engaged in interstate commerce” requirement while still meeting the far broader “involving commerce” requirement of § 2. The panel continued, stating that, given the breadth of Congress’ Commerce Clause power, there could be no doubt that the plaintiffs’ employment contracts fell comfortably within the ambit of § 2 of the FAA. The panel, therefore, affirmed the decision of the district court.
You can view the full opinion here.
Business Disputes in Arbitration
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