Grubhub Drivers Are Not Exempt From Arbitration, Massachusetts High Court Rules

On-demand delivery drivers for Grubhub are subject to the company’s mandatory arbitration clauses in their contracts, the Massachusetts Supreme Judicial Court has ruled in overturning a lower court that found the drivers were entitled to an exemption under federal law.

The state’s high court ruled that delivery drivers are not involved in interstate commerce in the manner required for an exemption under the Federal Arbitration Act.

The opinion by Justice Dalila Argaez Wendlandt discusses whether delivery drivers, who deliver takeout food and various prepackaged goods from local restaurants, delicatessens, and convenience stores to Grubhub customers, fall within a residual category of workers — namely, “any other class of workers engaged in foreign or interstate commerce” -– who, like “seamen” and “railroad employees,” are exempt from arbitration under the Federal Arbitration Act.

The Bay State’s high court joined the numerous courts that have addressed the same question and concluded that the delivery drivers are not exempt from arbitration. It ruled the arbitration agreements between the drivers and Grubhub are binding.

The drivers all worked in Massachusetts and did not cross state lines in their work for Grubhub.

In February 2017, Grubhub distributed an arbitration agreement to its drivers through an online portal. The plaintiffs each signed the agreement electronically. The agreement included a provision requiring the drivers to submit all “past, present or future” disputes “arising out of or related to [e]mployee’s . . . employment and/or separation of employment,” including “any claims based upon or related to . . . retaliation . . . [and] wages or other compensation,” to final and binding arbitration.”

The agreement further provided that the terms of the agreement were governed by the FAA and included a class action waiver stating that “[t]here will be no right or authority for any dispute to be brought, heard, or arbitrated as a class action.”

In October 2019, the plaintiffs sued Grubhub in the Superior Court, alleging that Grubhub violated the wage act, the tips act, and the minimum wage act, and that Grubhub unlawfully retaliated against drivers who complained about their wages.

In May 2020, Grubhub moved to compel arbitration and to dismiss the complaint, asserting that each plaintiff had entered into an agreement to arbitrate, which was enforceable under the FAA.

Following a hearing, a Superior Court judge denied Grubhub’s motion. The judge found that the plaintiffs entered into the arbitration agreement; however, the judge concluded that the plaintiffs, by virtue of their transportation and delivery of prepackaged food items, some of which were manufactured outside Massachusetts, fell within the definition of workers who are exempt from arbitration under the FAA.

Grubhub appealed, and the state’s high court transferred the case from the appeals court.

The drivers insist that they fall within the residual category of exempt workers because even though they do not cross state lines, they transport goods, such as prepackaged chips or soda, that are in the flow of interstate commerce because some of the goods have moved across state or national lines.

But the high court said they are not involved in interstate commerce in the way required to qualify for the FAA exemption. The exemption requires that the class of workers “must be connected not simply to the goods, but to the act of moving those goods across state or national borders.” The court concluded that the Grubhub drivers are not involved in the “continuous interstate transmission of these goods.”

The court noted that 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.

“[A]t the moment the goods at issue here entered the flow of interstate commerce, the destination was not the address of the Grubhub customer ordering the takeout food or convenience items for delivery. At most, the goods were destined for the local restaurants, delicatessens, and convenience stores that ordered them. Any subsequent journey taken by the goods in the hands of the Grubhub drivers, as part of the takeout meal, was not part of the ongoing and continuous interstate transmission of these goods,” the judge wrote.

The drivers further complained that Grubhub’s online process for the arbitration agreement did not allow for reasonable communication and assent.

.Grubhub argued that the opportunity to review the agreement before signing constituted sufficient notice, and that the plaintiffs manifested their assent to the arbitration agreement.

Again, the court sided with Grubhub, noting that Massachusetts courts have routinely concluded that clickwrap agreements — whether they contain arbitration provisions or other contractual terms – provide users with reasonable communication of an agreement’s terms.

Topics Legislation Personal Auto Massachusetts