- Law firms
- Arbitration exemption doesn't apply to Grubhub drivers-court
- But in recent rulings, FAA exemption was extended to Amazon
- Latest victory for gig economy firms over arbitration issue
(Reuters) - Massachusetts' top state court said on Wednesday that Grubhub Inc drivers are not engaged in interstate commerce when they make food deliveries and must arbitrate claims that they were misclassified as independent contractors rather than suing in court.
The seven-member Massachusetts Supreme Judicial Court unanimously ruled that because Grubhub drivers are not involved in the continuous flow of good across state lines, they are not exempt from the Federal Arbitration Act (FAA) and agreements they signed to individually arbitrate legal disputes are enforceable.
The plaintiffs in the 2019 lawsuit claim Grubhub misclassified drivers as independent contractors rather than its employees and deprived them of the minimum wage in violation of Massachusetts law. They had proposed a statewide class of drivers who had delivered for Grubhub since 2016.
Grubhub, which is represented by Gibson Dunn & Crutcher, said in a statement that it was pleased with the ruling.
Eric LeBlanc, a lawyer for the plaintiffs, declined to comment on the decision and said "we are considering our options."
To contain costs, gig economy companies like Grubhub rely on the use of independent contractors, who can cost up to 30% less than employees because they are not afforded the same legal protections and benefits.
Grubhub and companies including Uber Technologies Inc, Lyft Inc and DoorDash Inc have faced a wave of misclassification lawsuits in recent years.
Wednesday's ruling is the latest victory for a gig economy company over whether those claims belong in court or private arbitration. The 7th U.S. Circuit Court of Appeals ruled for Grubhub in a separate 2020 case, and Uber and Lyft have won similar cases.
But in other recent rulings, the FAA exemption has been extended to Amazon.com Inc "last mile" delivery drivers and airline workers. The U.S. Supreme Court last month said Southwest Airlines baggage handlers are engaged in interstate commerce because they routinely load cargo onto planes that cross state lines.
On Wednesday, the Massachusetts court said that when the goods delivered by Grubhub drivers traveled through interstate commerce, their final destination was stores and restaurants. Amazon packages, by contrast, move in a continuous flow until reaching the customers who ordered them, the court said.
"Any subsequent journey taken by the goods in the hands of the Grubhub drivers, as part of the takeout meal, was not part of the ongoing and continuous interstate transmission of these goods," Justice Dalila Wendlandt wrote for the court.
The ruling reversed a 2021 decision by a state judge who had denied Grubhub's motion to compel arbitration.
The case is Archer v. Grubhub Inc, Massachusetts Supreme Judicial Court, No. SJC-13228.
For the plaintiffs: Eric LeBlanc of Bennett & Belfort
For Grubhub: Theane Evangelis of Gibson, Dunn & Crutcher
Our Standards: The Thomson Reuters Trust Principles.