Delivery drivers’ Massachusetts misclassification claims not preempted by federal law

By Joy Waltemath

By Harold S. Berman J.D.

Two drivers could proceed with their state-law claims against a furniture delivery company alleging they were misclassified as independent contractors, even though a portion of the relevant Massachusetts statute was preempted by federal law, the Supreme Judicial Court of Massachusetts ruled. Although a portion of G.L c. 149, s. 148b concerning independent contractors could not survive preemption by the Federal Aviation Administration Authorization Act (FAAAA), the remainder of the state statute was severable and not preempted, and so did not bar the drivers from asserting they were employees, rather than independent contractors, the state high court held, reversing the lower court’s grant of summary judgment to the delivery company (Chambers v. RDI Logistics, Inc., December 16, 2016, per curiam).

Drivers incorporated. Before contracting to work with RDI, a company providing delivery services for furniture companies, the drivers incorporated, since RDI only did business with independent business entities. The contracts prevented the drivers from performing similar work with RDI’s competitors—their contracts would be terminated if they did so. RDI required the drivers to wear uniforms and display RDI or customer logos on their trucks, and deducted from the drivers’ pay the costs of the uniforms and other costs. RDI also regulated how the drivers loaded their trucks, which customers they delivered to, the routes they took, and the windows of time in which they made their deliveries.

Contracts terminated. In 2011, RDI terminated its contract with the company of one of the drivers. In the summer of 2013, a second driver told his fellow drivers he suspected RDI was misclassifying them as independent contractors, and RDI told him that his contract was subject to review. In September 2013, after RDI accused the second driver of attempting to file a lawsuit under the state independent contractor statute, the second driver was fired. The two drivers subsequently filed a class action against RDI and one of its managers under the independent contractor statute, and a retaliation claim by the second driver. RDI counterclaimed, alleging breach of contract against the first driver, and filing a third-party complaint against the drivers’ respective corporations for indemnification.

Letters to other contractors. While the suit was pending, RDI sent letters to certain RDI contractors with a $1,000 check. The letters referenced the class action, and offered the one-time payment in exchange for a release of claims. The two drivers sought an emergency protective order barring RDI from communicating with putative class members, and striking any settlements obtained from the letters, but the motion was denied.

Lower court ruling. The drivers moved for partial summary judgment on their misclassification claim, and RDI cross-moved for summary judgment on all claims. The judge denied the drivers’ motion, but granted RDI’s motion and dismissed all claims, finding that the FAAAA entirely preempted the independent contractor statute. The Supreme Judicial Court granted direct appellate review.

Contravened congressional objectives. The state high court agreed with RDI that the state statute contravened Congress’ objectives in enacting the FAAAA. Specifically, the statute’s requirement that an employer must prove that “the service is performed outside the usual course of the business of the employer” in order to establish that a presumptive employee was actually an independent contractor, favored FAAAA preemption. This requirement created an impossible standard for motor carriers wishing to use independent contractors and so constituted an impermissible significant impact on motor carriers that would undercut Congress’ objectives in passing the FAAAA by substituting governmental commands for competitive market forces.

Because a delivery driver for a motor carrier would necessarily be performing services within the “usual course of the business of the employer” whenever delivery services were part of its usual business, the state statute effectively required RDI to use employees rather than independent contractors, compelling them to adopt a different manner of providing services than they otherwise might choose. Additionally, the provision’s distinct nature, anomalous among state laws regulating classification of workers, contravened the congressional objective of preventing a “patchwork of state service-determining laws.”

Severability. RDI contended that various parts of the state statute were intertwined and nonseverable, and so the entire statute was preempted. The court disagreed. Although the prongs of the statute were conjunctive, they operated independent of each other. As severed, the statute would still provide two independent tests concerning whether a motor carrier’s workers were independent contractors. Striking the entire statute would be inconsistent with the legislature’s intent to provide additional safeguards for the Commonwealth’s workers beyond the provisions of common law.

Severed statute not preempted. The high court dismissed RDI’s assertion that the FAAAA preempted the state statute, even if severed, because enforcing the drivers’ claims would still impact RDI’s services. The severed statute would not have a significant impact on Congress’ deregulatory and preemption-related objectives because it would not target or restrict motor carriers in any way. The severed statute would allow a motor carrier to use either employees or independent contractors, only requiring it to prove that the worker’s terms showed him to be one of the two. To the extent the severed statute impacted motor carriers, the effect was too remote to trigger FAAAA preemption. Moreover, the severed statute contained only commonly used tests of employment not intended to be preempted by the FAAAA. Accordingly, the high court reversed the lower court’s grant of summary judgment on the drivers’ misclassification claims, finding there were material facts in dispute under the statute as severed.

Drivers had standing. The court also rejected RDI’s contention that the driver lacked standing to sue because the state statute applied only to individuals, not to the drivers’ corporations that had contracted with RDI. There was a material factual issue whether a worker’s use of a corporation was at the worker’s behest or required by the employer. That the drivers asserted they only formed companies to contract with RDI, only worked for RDI, and were forbidden from working for other companies raised the question whether they incorporated for their own benefit or whether RDI required them to incorporate so it could misclassify them.

Source:: Employment Law Daily Newsfeed