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Lyft drivers’ Wage Act claims not subject to arbitration

Lyft drivers are not required to arbitrate claims that the ridesharing company misclassifies them as independent contractors in violation of the Massachusetts Wage Act, a federal judge in Boston has ruled.

Lyft argued that arbitration agreements that plaintiffs Melody Cunningham and Frunwi Mancho executed when they registered online to become Lyft drivers barred class-wide relief and required individual arbitration of claims.

The plaintiffs countered that they fell within an exception to the Federal Arbitration Act. Section 1 of the FAA provides an exemption for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

In a March 27 decision, U.S. District Court Judge Indira Talwani ruled that the plaintiffs were not bound by the arbitration agreements, rejecting Lyft’s contention that the FAA exemption at issue only applied to workers engaged in the interstate transportation of goods.

“[T]he court finds no basis in the statute or in precedent that limits Section 1 to workers who transport goods and that categorically excludes workers who transport passengers as Lyft contends,” Talwani wrote.

In reaching her conclusion, the judge found persuasive the 3rd U.S. Circuit Court of Appeals’ decision in Singh v. Uber Technologies. In the 2019 case, the court held that “the residual clause of §1 [of the FAA] may extend to a class of transportation workers who transport passengers, so long as they are engaged in interstate commerce or in work so closely related thereto as to be in practical effect part of it.”

Talwani proceeded to find that the plaintiffs engaged in interstate commerce pursuant to the FAA, notwithstanding Lyft’s contention that the drivers “rarely crossed state lines.” Reviewing applicable precedent, Talwani explained that the critical question is whether the plaintiffs “transport passengers that travel interstate.”

The judge found compelling the fact that the plaintiffs’ passengers included those traveling to or from Logan International Airport. Talwani wrote that the evidence, therefore, established that the plaintiff’s “engagement in interstate commerce is not incidental, but essential to their work.”

Finally, the judge rejected Lyft’s alternative argument that the plaintiffs should be compelled to arbitrate their claims pursuant to the Massachusetts Uniform Arbitration Act. Talwani observed that the Massachusetts Supreme Judicial Court in its 2009 decision in Feeney v. Dell Inc. concluded that a class-action waiver, like the one in Lyft’s terms, “contravenes Massachusetts public policy.” The SJC later recognized the rule enunciated in Feeney extended to cases brought under the Wage Act in a 2013 case, Machado v. System4 LLC.  

While intervening U.S. Supreme Court precedent has abrogated Feeney with respect to contracts governed by the FAA, Talwani found no reason to conclude that the state rule against class-action waivers is abrogated where the FAA does not apply.

Accordingly, Talwani concluded that the plaintiffs’ “arbitration agreements are not subject to the FAA as Plaintiffs fall within the Section 1 exemption, and that the class action waiver in the arbitration agreement between the parties is not enforceable under Massachusetts law as it contravenes Massachusetts’ public policy against class action waivers of Wage Act claims.”

The 17-page decision in Cunningham v. Lyft, Inc. can be found here.

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