Ninth Circuit Broadly Interprets FAA Exemptions

The United States Court of Appeals for the Ninth Circuit (Ninth Circuit) issued an opinion in a recent case that broadly interpreted provisions under the Federal Arbitration Act (FAA), specifically FAA exemptions. The Ninth Circuit’s jurisdiction covers the states and territories of Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Mariana Islands, Oregon, and Washington. For almost 100 years, the FAA has protected the right of employers to compel arbitration with their employees. Earlier this year, the Ninth Circuit issued a separate ruling stating that the FAA pre-empts California law that prohibits forced arbitration.

Background of the Case

Miller v. Amazon.com involved Amazon Flex delivery drivers who made “last-mile” deliveries (deliveries made from a distribution center or warehouse to its final destination) of goods shipped from states or countries other than the destination state. Also included in the case were tip-eligible workers who made deliveries of food, groceries, and packages stored locally. These parties alleged that Amazon had violated state laws when it failed to honor promises that workers would receive all tips customers added to local deliveries. Subsequently, the parties brought their case in Miller v. Amazon.com, circumventing the arbitration clause within their contract with Amazon.

Federal Arbitration Law and FAA Exemptions

Enacted in 1925, the FAA is a federal law that provides for arbitration between employers and employees. The FAA’s principal objective is to enforce private arbitration agreements. The FAA’s core principle states that non-exempt arbitration agreements are valid, irrevocable, and enforceable (except on legal or equitable grounds for the revocation of a contract). Notably, FAA exemptions include employment contracts covering seamen, railroad employees, or any class of workers engaged in foreign or interstate commerce. Briefly, the benefits of arbitration include privacy, lower cost, and efficiency in employment disputes. Employers should, however, ensure that they comply with several employment laws that affect the workplace. After all, employees can still file complaints with federal agencies that enforce these laws despite any arbitration agreement. Private arbitration agreements do not prevent the agencies from filing their own lawsuits.

Ninth Circuit’s Decision in the Case

In Miller v. Amazon.com, the Ninth Circuit referred to its earlier decision in Rittmann v. Amazon.com. In the earlier decision, the Ninth Circuit held that Amazon Flex drivers, like the plaintiffs in Miller v. Amazon.com, qualified under FAA exemptions. Specifically, the Ninth Circuit argued that these workers engaged in interstate commerce since they delivered goods from other states or countries to a final destination in a different state. Subsequently, Amazon argued that the U.S. Supreme Court’s (SCOTUS’s) decision in Southwest Airlines Co. v. Saxon pre-empted the Rittmann decision. Amazon argued that under the SCOTUS ruling, courts must examine workers’ own activities rather than the business’ activities when determining whether workers are engaged in interstate commerce. However, the Ninth Circuit declined to revisit its previous decision. Amazon also argued that the plaintiffs in Rittmann differed from those in Miller because they included workers who made tip-eligible local deliveries. However, the Ninth Circuit made no such distinction in its ruling. The Ninth Circuit instead argued that the plaintiffs were part of the “exact same class of workers we discussed in Rittmann: Amazon Flex delivery drivers who ‘are engaged to deliver packages from out of state or out of the country, even if they also deliver food from local restaurants.’”