However, Section 1 of the FAA excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” which the Court has ruled to include “contracts of employment of transportation workers.” 9 U.S.C. § 1; Circuit City Stores v. Adams. The majority of lower courts to have examined the matter had interpreted the Section 1 exemption to apply only to employees and not to independent contractors. Dominic Oliveira, a truck driver who was at various times an apprentice, independent contractor, and employee for the interstate trucking company New Prime, brought a class action suit against New Prime alleging that the company failed to pay him and other drivers minimum wage for all hours worked.

By its terms, the FAA does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In a unanimous 8-0 decision (Justice Brett Kavanaugh did not participate), the Court held that: Whether the FAA’s Section 1 exemption applies to an arbitration agreement is a question for a court to decide first; The FAA’s Section 1 “contracts of employment” exemption covers independent contractors as well as employees.

Section 1 of the Federal Arbitration Act exempts from the Act’s coverage “contracts of employment” of two specifically enumerated categories of workers—“seamen” and “railroad employees”—and of a residual category of “any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In the district courts and in a consolidated appeal of their cases in the Seventh Circuit, the drivers argued that they qualified as “workers engaged in foreign or interstate commerce,” such that their Delivery Service Provider Agreements were exempt from the Federal Arbitration Act’s coverage.

Finally, the Court majority found that enforced the class and collective action waivers that SDS and Health Express included in their service agreements were knowing, voluntary and enforceable.BackgroundSection 1 of the FAA, 9 U.S.C. §1 (“Section 1”) provides that the FAA does not “apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” In New Prime, the U.S. Supreme Court held that the FAA Section 1 exemption applies to independent contractors as well as employees who are engaged in interstate commerce.

The AppealSection 1 excludes from the FAA’s coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. §1. But the dispute specifically centered on what is known as the “residual clause” – the “any other class of workers” portion.Based on its prior decisions, the panel held that the residual clause “extends to both transportation workers who transport goods as well as those who transport passengers,” citing Tenney Engineering, Inc. v. United Electrical Radio & Machine Workers of America, (U.E.) Local 437, 207 F.2d 450 (3d Cir. 1953); Amalgamated Association of Street Electric Railway & Motor Coach Employees of America v. Pennsylvania Greyhound Lines, 192 F.2d 310 (3d Cir. 1951); and Pennsylvania Greyhound Lines v. Amalgamated Association of Street Electric Railway & Motor Coach Employees of America, Division 1063, 193 F.2d 327 (3d Cir. 1952).

For those who may have forgotten, Section 1 excludes from the Act’s coverage: “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In a Supplemental Response in Support of its Motion to Dismiss and Compel Arbitration filed on March 6, 2019, Amazon maintained that the plaintiffs’ argument conflicted with the exemption’s language, purposes and relevant decisions.

Carmona is the latest stop in a journey that has seen courts liberally interpret “interstate commerce” to encompass intrastate transportation.Last-Leg Drivers In Domino’s Supply ChainCarmona involves the supply chain for Dominos’ Pizza franchises. As the Court explains, Domino’s buys ingredients across the country and then delivers them to a local supply center – here, in California.At the supply center, Domino’s reapportions, weighs, and packages the ingredients but does not otherwise alter them. After this intake, Domino’s drivers then perform the “last leg” of delivery by transporting the now-packaged ingredients from the supply center to local franchisees within the state.Procedural HistoryIn Carmona, three last-leg drivers in California brought a putative class action against Domino’s, alleging wage-and-hour violations under state law.Domino’s moved to compel arbitration but the district court denied, finding that the drivers were exempt from the FAA under 9 U.S.C. § 1 (“Section 1”) as members of a class of transportation workers “engaged in foreign or interstate commerce.”In 2021, the Ninth Circuit affirmed the denial. But in 2022, the U.S. Supreme Court granted certiorari, vacated, and remanded for reconsideration in light of Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022). Saxon held that Section 1 exempted from the FAA “workers who physically load and unload cargo on and off airplanes.” 142 S. Ct. at 1789.The Ninth Circuit (Again) Holds That Domino’s Last-Leg Drivers Are Exempt From ArbitrationOn July 21, 2023, the Ninth Circuit again affirmed the district court’s denial of Domino’s motion to compel arbitration. The Court’s decision was driven by Saxon and Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020).In finding Section 1 exempt cargo workers, the Supreme Court in Saxon examined whether they are actively “engaged in transportation” of goods in interstate commerce and play a “direct and necessary role in the free flow of good

en plaintiffs registered as couriers, they were required to accept Postmates “Fleet Agreement” which, among other things, classifies the couriers as independent contractors and includes a mutual arbitration provision governed by the FAA. The arbitration provision requires all disputes be resolved through final and binding arbitration under AAA Rules, but allows a courier to opt-out of the arbitration provision within 30 days of accepting the Fleet Agreement. Plaintiffs did not opt out of the arbitration provision.Plaintiffs filed an action in Massachusetts state court on behalf of themselves and a putative class of couriers, alleging Postmates misclassified them as independent contractors and, as employees, they were entitled to benefits such as reimbursement of business expenses, the payment of a minimum wage, and paid sick leave. Postmates removed the action to federal court and moved to compel arbitration. Plaintiffs opposed the motion contending they were exempt from the FAA under 9 U.S.C. §1. The district court determined the exemption did not apply, granted Postmates’ motion to compel arbitration, and stayed the federal action pending the outcome of the arbitration. Plaintiffs accepted individual offers of judgment in the arbitration and the district court dismissed the case.On appeal, the plaintiffs argued they “belong to a class of workers encompassed by the residual clause of section 1 and are therefore outside the grasp of the FAA.” Section 1 of the FAA provides, in part, “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The court noted, however, that the Supreme Court “has interpreted the residual clause of this exemption to apply only to ‘transportation workers,’ meaning workers who play a ‘necessary role’ in the interstate transport of goods.” [Citation omitted]. The court rejected plaintiffs’ argument, concluding “couriers who deliver meals and

Judge Amy Barrett, who authored the decision, began her interpretation with the text of § 1 of the FAA, which declares that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. Most relevant to the decision was the residual category “any other class of workers engaged in foreign or interstate commerce” and its “membership.” Perhaps the most meaningful portion of the decision was that the “operative unit” was a “class of workers,” not simply individual workers who claim to have worked in commerce.

They also argued that the Chamber of Commerce lacked standing to challenge AB 51. In their Opposition to Motion For Preliminary Injunction (Document 23), Defendants argued that any claim of irreparable harm by plaintiffs was “also undermined by the fact that more than a million California employees in the transportation industry alone are not even subject to the FAA,” citing Section 1 of the FAA, 9 U.S.C. §1. Indeed, after New Prime v. Oliveira, 139 S. Ct. 532 (2019) certain workers in the transportation industry may be excluded from FAA coverage by Section 1. That exclusion covers “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. §1.