California Appeals Court Exempts Amazon Last-Mile Drivers from Arbitration

This is a big deal because worker advocates generally see the arbitration process as favoring employers. The process, in that view, is the problem. Because federal law favors arbitration, the question tackled by the Appeals Court in Clinton v. Amazon Logistics Inc. has more to do with the provisions of the Federal Arbitration Act (FAA) than it does with the specifics of California statutes.

The question at hand is whether the last mile drivers – who drove only within state boundaries, but as the last step in the interstate delivery of goods – were covered by an interstate commerce exemption to the arbitration requirements of the FAA. It is the same question that is currently being considered by the U.S. Supreme Court in Brock v. Flower Foods, Inc.

The Brock and Clinton parties are different, and the state laws implicated are also different, but the federal issue is the same. The more developed record in Brock helps to clarify why lawsuits like Clinton are important.

Kicking the problem upstairs – California labor lawsuit becomes interstate commerce question

Six Amazon local delivery drivers brought separate California labor lawsuits (since consolidated) that alleged that they were underpaid as independent contractors, and so not entitled to overtime, workers’ compensation coverage or other benefits. Instead, they argue, they should have been classified as employees under California law and entitled to these aspects of compensation. In addition to their misclassification issues, they brought claims under California’s Private Attorneys General Act (PAGA). PAGA claims can result in substantial penalties for an employer.

Amazon maintains that the disputes should be submitted to individual arbitration under the provisions of the onboarding agreements signed by the drivers. In August 2024, the Orange County Superior Court held that the drivers “were transportation workers engaged in interstate commerce and exempt from the FAA.” The California Court of Appeals affirmed that decision.

Clinton was a major loss for Amazon, and Amazon seems likely to appeal to the California Supreme Court. A U.S. Supreme Court decision in Brock could determine the ultimate outcome of Clinton, and thus whether the Amazon or the last-mile drivers prevail.

Federal law favors arbitration

The FAA, enacted in 1925, expresses a strong national policy that favors arbitration. It requires courts to enforce written arbitration agreements in contracts as valid and irrevocable. The FAA, however, excludes “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” At the time the law was enacted, many of these workers were covered by collectively bargained labor agreements that set out specialized dispute resolution mechanisms.

Today, mandatory arbitration agreements are far more common. Workers, even those in low wage jobs and independent contractors, must agree to arbitrate employment disputes. They are unlikely to be represented by labor organizations.

The agreements may also be tucked away in onboarding documents. With the Amazon drivers, the arbitration clause was in the “Amazon Flex Independent Contractor Terms of Service,” which plaintiffs accepted when they downloaded the Amazon Flex app and signed on to be drivers. The arbitration agreements were not the product of negotiation, and workers may have had no idea that they signed them.

The Supreme Court has previously held that the 1925 transportation exemption covers other interstate workers, including truck drivers, regardless of whether they are employees or independent contractors.

The remaining legal issue in both Clinton and Brock is whether the goods were still in interstate commerce after they were picked up by the last-mile drivers but before they were delivered to the ultimate customer.

The policy question

Parsing through the logic of U.S. Supreme Court arguments and the Court’s ultimate decisions can be hugely frustrating for workers and those who advocate on their behalf. The world of work has changed enormously since the early twentieth century, and to some the interstate/intra-state quibble seems to miss the point.

Currently, more than half of all non-union private sector employers bind employees to mandatory arbitration, and 60 million workers in the U.S., including Uber drivers, Walmart cashiers and Amazon warehouse workers, no longer have access to the courts to vindicate their workplace rights. Further, these arbitration clauses are often buried in the fine print of one-sided employment contracts that workers have no power to contest. 

In 1925, when the FAA was drafted, Congress was concerned about protecting the stability of commerce, and the freedom of contract argument seemed to support this goal. After all, the thinking goes, people should have to keep their promises.

But the bargaining position of workers has deteriorated since the days of strong unions and a time when only sophisticated and highly paid employees were bound by employment contracts. As California and other states argue in their amicus brief in Brock, the legal formalities of the arbitration provisions have become “irrelevant.” The same argument might apply in the Clinton lawsuit, as well.