First Circuit Affirms FAAAA Preemption of Massachusetts Independent Contractor Law

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Contact

On May 11, 2016, the First Circuit Court of Appeals issued the latest of several decisions supporting and furthering federal preemption of the Massachusetts independent contractor statute for businesses that qualify as motor carriers under the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The practical impact of the First Circuit’s decision in Massachusetts Delivery Association v. Healey and the cases that preceded it is that motor carriers, including many delivery businesses, may be able to classify their drivers as independent contractors with a reduced risk of violating the Massachusetts independent contractor statute.

Background

Congress enacted the FAAAA in 1994 to preempt state trucking regulations that had become burdensome on interstate commerce and free trade, and to avoid a “patchwork” of state laws, rules, and regulations that increased costs and caused significant inefficiencies for interstate motor carriers. To achieve that end, the FAAAA included a preemption provision providing that states could not enact or enforce laws or regulations “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.”

Recently, delivery services and other motor carriers have argued that the FAAAA preempts state employment laws that may otherwise apply to their drivers, including state laws governing the classification of independent contractors and state meal break laws. Generally speaking, courts across the country have differed in their interpretations of exactly how far the FAAAA preemption can reach and which state laws can be preempted.

The Latest Case: Massachusetts Delivery Association v. Healey

The Massachusetts Delivery Association, a trade organization for delivery-service companies, brought a lawsuit seeking a declaration that the Massachusetts independent contractor law is preempted by the FAAAA. The Massachusetts law provides that workers must be considered employees (as opposed to independent contractors) unless the employer can meet all three prongs of the test:

  1. the individual is free from control and direction in the performance of the service, both under the terms of his or her contract and in actuality;
  2. the individual performs a service that is outside the usual course of business of the employer; and
  3. the individual is customarily engaged in an independently established trade or business of the same nature of the service he or she performs. 

The Massachusetts Delivery Association argued that the requirement of Prong 2—the “usual course of business” prong—makes it impossible for any delivery company to treat its delivery drivers as independent contractors. It argued the prong of the test should be preempted because, by requiring carriers to treat their couriers as employees, the law related to the carriers’ prices, routes, or services.

On appeal, the First Circuit affirmed the district court’s summary-judgment decision that the FAAAA preempted Prong 2. The appellate court’s reasoning relied on its own February 2016 decision in a case brought by drivers alleging that the company for which they worked had improperly classified them as independent contractors In that case, the district court had agreed with the employer’s argument that the FAAAA preempted the statute, and the First Circuit affirmed the finding of preemption. In the face of a direct request by the Massachusetts Attorney General to reconsider this prior ruling, the First Circuit instead relied on it—at least as to delivery drivers.

Impact

This most recent decision in Massachusetts Delivery Association reinforces the broad preemption power of the FAAAA within the First Circuit, even when the state law at issue has only an indirect effect on prices, routes, or services. The First Circuit also maintained its position that the impact on carriers’ prices, routes, or services may be proven only by the “logical effect” that the law has on the delivery of services—without need for empirical evidence. Furthermore, because the FAAAA has the same preemption language as the Airline Deregulation Act, the First Circuit’s ruling on FAAAA preemption affects not only motor carriers, but also, by extension, air carriers. The ruling is certainly a beneficial decision for businesses seeking to retain independent contractor arrangements with their workforces. 

While the practical effect of the ruling may be that delivery-service businesses and some other employers in Massachusetts may utilize independent contractors without being forced to make them employees, those arrangements still must satisfy the first and third prongs of the test. In other words, a business must still be able to demonstrate that the workers in question are free from the employer’s direction and control and that they are customarily engaged in independently established businesses of their own.

This decision, while reinforcing the First Circuit’s stance, further highlights its divide with other circuits (including the Seventh and Ninth Circuits), which have considered FAAAA preemption and ruled in the opposite direction. Absent a ruling by the Supreme Court of the United States, this is likely to be an area of law that will continue to develop in diverging directions across the country.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Contact
more
less

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.