On July 21, 2023, the U.S. Court of Appeals for the Ninth Circuit kept in place a ruling that local delivery drivers who made deliveries completely inside California are still engaged in interstate commerce and exempt from the Federal Arbitration Act (FAA).

Quick Hits

  • The Ninth Circuit kept in place an earlier ruling that last-leg delivery drivers who transported interstate goods are engaged in interstate commerce and exempt from the Federal Arbitration Act.
  • The Ninth Circuit found the drivers are still engaged in interstate commerce even though they made deliveries within California only.
  • The Ninth Circuit rejected the argument the Supreme Court’s June 2022 ruling involving airline cargo workers required a different result.

The ruling in Carmona v. Domino’s Pizza, LLC comes after the Supreme Court of the United States vacated the Ninth Circuit’s previous ruling that the delivery drivers, who delivered ingredients to California franchises from a supply chain center in the state, fall into the FAA’s “transportation worker” exemption.

The Supreme Court asked the Ninth Circuit to reconsider its previous ruling in light of the Supreme Court’s June 2022 ruling in Southwest Airlines Co. v. Saxon. In that case, the Supreme Court found airline employees who loaded and unloaded cargo on and off airplanes traveling across state lines to be part of a “class of workers engaged in foreign or interstate commerce” because they directly and regularly engaged in the movement of goods in interstate commerce. Though the Supreme Court sided with the workers, the decision rejected the notion that airline workers are categorically exempt and found that the question should turn on the job duties of the specific workers at issue and not the company’s involvement in interstate commerce.

However, the Ninth Circuit found that Saxon did not address the same question involving “last leg” delivery drivers at issue in the Carmona case. Instead, the Ninth Circuit relied on its prior decision in Rittmann v. Amazon.com, Inc., where it found package delivery drivers who transport interstate goods to their final destinations on the last leg of their journeys to be engaged in interstate commerce.

Further, the Ninth Circuit rejected arguments that the drivers in Carmona differ from the drivers in Rittmann because they only delivered goods that were ordered after the goods had already arrived at an in-state warehouse. The Ninth Circuit concluded that the drivers are still ‘“engaged in a single, unbroken stream of commerce’” and that the “pause in the journey of the goods at the warehouse alone [does not] remove them” from that stream.

Next Steps

To mitigate risks associated with class actions, many employers rely on arbitration agreements with class action waivers enforceable under the FAA. In response, many workers have attempted to avoid such agreements by arguing the FAA’s transportation worker exemption applies to them. The Supreme Court has stated that the question of whether the exemption applies should focus on workers’ specific job duties, not their industries. However, the Ninth Circuit’s holding in Carmona that last-leg delivery drivers who only make in-state deliveries are nonetheless engaged in a stream of interstate commerce, could complicate the issue for employers.

Ogletree Deakins will continue to monitor developments and will provide updates on the Airline and Railway, Arbitration and Alternative Dispute Resolution, and Wage and Hour blogs.

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