Delivery drivers’ Massachusetts law claim for unlawful pay deductions not preempted by FAAAA

By Joy Waltemath

By Harold S. Berman J.D.

Drivers for a delivery service company who claimed they were improperly treated as independent contractors rather than employees could proceed with their state law claim for unlawful deduction of expenses from their pay, as their claim was not preempted by the FAAAA, a federal district court in Massachusetts ruled. The court denied the company’s motion to dismiss the drivers’ Massachusetts Wage Law (MWL) claim, finding that the definition of “employee” used by the MWL (and defined in the Massachusetts Independent Contractor Statute) did not significantly impact the company’s prices, routes, or services such that preemption would be triggered. Additionally, the company had not claimed to be a motor carrier under the FAAAA. The court dismissed the drivers’ unjust enrichment claim, however, finding that the drivers already had an adequate statutory remedy (DaSilva v. Border Transfer of MA, Inc., January 5, 2017, Saris, P.).

Drivers treated as independent contractors or employees? A group of drivers worked for Border Transfer, which provided delivery services for large retail stores. The drivers’ relationship with Border Transfer was governed by contract carrier agreements, which stated that the drivers were independent contractors. However, the drivers alleged that they should have been classified as employees because Border Transfer exercised substantial control over them and they could not maintain an independently established business.

Company controlled terms of drivers’ work. The drivers were required to report to Border Transfer five mornings a week and were instructed how to assemble equipment and interact with customers, directed to load goods in a specific order and deliver them at specific times, required to log each delivery and to be in contact with Border Transfer personnel throughout the day regarding the status of deliveries, and to return customers’ equipment to the warehouse. The drivers could not use helpers unless they passed Border Transfer’s background checks, and Border Transfer could terminate the helpers at-will. Border Transfer required the drivers to use trucks that met its specifications and to carry specific insurance. Border Transfer monitored customer ratings of the drivers and could terminate drivers without cause.

Expenses deducted from pay. Border Transfer also deducted certain expenses from the drivers’ paychecks, such as the costs of uniforms, costs of paying for a replacement driver if a driver could not complete a delivery, and costs resulting from an improper delivery (if goods or consumer property was damaged). Drivers paid for workers’ compensation coverage, cargo insurance, fuel costs, vehicle maintenance costs, and payments to helpers.

Class action. After the agreements with Border Transfer expired, the drivers filed a class action complaint, alleging that Border Transfer improperly treated the drivers as independent contractors rather than employees and had unlawfully deducted certain expenses from their pay. The drivers claimed violation of the MWL and unjust enrichment. Border Transfer then moved to dismiss, asserting that the drivers’ MWL claim, unjust enrichment claim, and the entirety of the “employee” definition in the Massachusetts Independent Contractor Statute were preempted by the FAAAA.

State wage law claim not preempted. Denying Border Transfer’s motion to dismiss the drivers’ MWL claim, the court determined that this claim, and the definition of an employee that was used by the MWL (and set forth in the Massachusetts Independent Contractor Statute Prongs 1 and 3), did not have a significant, impermissible effect on Border Transfer’s prices, routes, and services such that it would be preempted by the FAAAA. FAAAA preemption was not warranted because the two prongs of the Massachusetts statutory definition of employee under the Independent Contractor Statute (Prong 2 was held preempted by the First Circuit in Schwann v. FedEx Ground Package Sys., Inc. ) did not unreasonably prevent Border Transfer from using independent contract drivers. Prongs 1 and 3 still allow a carrier to use an independent contract driver model as long as the carrier does not exert a certain level of control over drivers or prevent them from engaging in an independently established trade, reasoned the court, distinguishing Prong 2, which made any person who performs a service within the usual course of the enterprise’s business an employee for state wage law purposes, and which had a significant effect on routes and services.

Border Transfer did nothing more than argue in a conclusory manner that the drivers’ state-law claims under the MWL and the Massachusetts Independent Contractor Statute together compelled different terms of service than those specified in Border Transfer’s agreement with the drivers. This argument was tenuous because the agreement itself did not contain service terms.

Company not a motor carrier under the FAAAA. Border Transfer did not allege any facts that Massachusetts law, by overriding the contract, had a significant impact on the services that Border Transfer provided to its customers. Instead, Border Transfer argued that if the court found under Massachusetts law that Border Transfer employed drivers who transported goods, then that finding could also trigger “motor carrier” status under the FAAAA for preemption purposes. However, Border Transfer considered itself to be a broker, rather than a motor carrier, and claimed its services would be significantly impacted were it required to meet the operating requirements federal law imposes on motor carriers. The court pointed out that any application of the federal motor carrier statute to Border Transfer, however, would be by operation of the federal statutory definition of a motor carrier and federal regulations defining “employer” and “employee,” not state law.

No unjust enrichment. Finally, the court dismissed the drivers’ unjust enrichment claim, holding that the MWL afforded the drivers an adequate statutory remedy and so they could not also claim unjust enrichment.

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