SJC sides with Grubhub, allows arbitration requirements for drivers
Delivery service may force employees to settle disputes out of court
GRUBHUB MAY REQUIRE its drivers to submit employment disputes to arbitration, the Supreme Judicial Court ruled Wednesday.
The ruling essentially codifies the status quo. But because of its potentially broad implications for workers and businesses if the court ruled the other way, the case attracted national attention, pitting workers’ rights groups against businesses. Companies like Uber, Lyft, and DoorDash all weighed in, voicing concerns about the potential impact on their business models.
This is the latest in a series of cases that address how app companies treat their drivers and what employment rules should apply to them in a gig economy that has strayed from the traditional employer-employee relationship.
“Unfortunately, in the wake of some terrible Supreme Court decisions over the pasts decade, courts around the country have been allowing companies to blatantly violate the law by hiding behind arbitration clauses,” said Shannon Liss-Riordan, a labor lawyer and candidate for attorney general who has represented workers in many similar cases and filed a brief on behalf of the Massachusetts Employment Lawyers Association in this case. “When arbitration causes are enforced, it allows bad actors to avoid the courtroom, avoid public scrutiny, avoid having to make the victims of their violations whole. And most egregiously, it allows corporations to continue to flout the law.”
Eric LeBlanc, an attorney for the former drivers who filed the case, declined to comment.
Grubhub is an app-based food delivery service that employs drivers who deliver food from local restaurants and convenience stores to customers. The plaintiffs are former Grubhub drivers. In 2017, Grubhub sent an arbitration agreement to its drivers, which these drivers signed online, agreeing to adjudicate any employment claims through arbitration rather than litigation.
In 2019, these drivers claimed that Grubhub violated state wage laws. Grubhub tried to force the drivers to go through arbitration, rather than a lawsuit. However, a Superior Court judge ruled in favor of the drivers and said the arbitration clause was unenforceable.
The central issue is the Federal Arbitration Act, a federal law that governs arbitration agreements and exempts “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The drivers claimed, and the Superior Court judge agreed, that Grubhub drivers could be classified as workers engaged in interstate commerce, even though these particular drivers only drove in Massachusetts, because the prepackaged foods they delivered had been manufactured elsewhere.
The Supreme Judicial Court, however, in a 21-page unanimous decision written by Justice Dalila Wendlandt, overturned the lower court and found that the drivers are not exempt from the Federal Arbitration Act, so the arbitration agreement they signed is valid. The SJC leaned heavily on cases in other jurisdictions, all of which found that drivers with app companies like Uber, Lyft, and DoorDash could be subject to arbitration agreements.
“Notably, all courts that have considered the applicability of the residual clause to delivery drivers similar to the plaintiff delivery drivers in this case have reached the same conclusion,” Wendlandt wrote.
One wrinkle is that the courts have concluded that Amazon drivers cannot be subject to arbitration because they are engaged in interstate commerce, based on two US Appeals Court rulings that the Supreme Court declined to review. But the SJC made a distinction between Amazon’s “last-mile delivery workers” who bring goods on their final leg of a cross-country journey, and Grubhub drivers, who deliver from a local restaurant to a local customer. The court ruled that any interstate journey ended when the food reached a store or restaurant, so Grubhub drivers who bring the food to a customer are not engaged in interstate commerce.
The US Chamber of Commerce argued in a court brief that arbitration resolves disputes more quickly with lower costs, using arbitrators experienced in specialized disputes. Ruling that these workers are exempt from arbitration requirements “would impose real costs on businesses,” attorneys for the business group wrote.
Uber and DoorDash said exempting Grubhub drivers would lead “to uncertainty and inconsistent results,” with the potential for any worker whose employment touches a good that crossed state lines to be exempt.
Jonathan Urick, associate chief counsel for the U.S. Chamber of Commerce Litigation Center, said in an email that the decision “is a victory for Massachusetts delivery drivers and businesses who would rather use arbitration to settle disputes than spend time and money filing a lawsuit where lawyers take hefty fees first.”
But the Massachusetts Employment Lawyers Association, represented by Liss-Riordan, argued in a court brief that workers are more likely to win in court than arbitration and more likely to obtain a higher award. Most workers will not even bring an arbitration case, while without an arbitration clause, attorneys could file a class action lawsuit covering an entire class of workers. “Not only does this system dissuade workers from pursuing justice, but it encourages employer misbehavior, as there is little accountability for employer wage theft and other illegal actions,” Liss-Riordan wrote in a court brief.In an interview, Liss-Riordan, one of three Democrats vying for the open AG’s seat, said she has worked with tens of thousands of employees to pursue individual arbitration cases, but those are far less effective in getting companies to change their behavior than an expensive and public class action lawsuit. “The worst that happens is they have to pay a penalty in a confidential award,” Liss-Riordan said. “It doesn’t change their practices.”
Attorney General Maura Healey also submitted a brief in favor of the drivers arguing that requiring arbitration would not be in the public interest, “as a whole host of employment disputes, including minimum wage violations committed against low-wage workers, would be hidden from public view in private (often confidential) arbitration proceedings.”