Massachusetts Appeals Court Concludes Employment Agreement Falls Within Purview of Federal Arbitration Act

In a recent unpublished decision, reversing a Superior Court decision, the Massachusetts Appeals Court concluded that certain agreements did not constitute “contracts of employment” and, therefore, were subject to the Federal Arbitration Act (FAA).

In Cuneo v. National Delivery Systems, Inc., the plaintiffs each executed a contract with National Delivery Systems, Inc. (NDS) that identified them as independent contractors (delivery drivers) and subjected them to an arbitration clause. Each plaintiff also executed an agreement with Contractor Management Services, LLC (CMS), which allowed CMS to pay the plaintiffs for the work they performed for NDS (CMS agreements).  The CMS agreements also contained arbitration clauses that included class action waivers.

The plaintiffs filed a class action alleging that they were employees of NDS, as opposed to independent contractors, and that NDS had violated the Wage Act and that CMS had engaged in unfair and deceptive practices in violation of G. L. c. 93A, § 11.  CMS moved to compel arbitration, arguing that the CMS agreements, including the arbitration provisions, were governed by the FAA.  The plaintiffs responded that the CMS agreements were exempt from the FAA under the transportation worker exemption, 9 U.S.C. § 1, and that the CMS agreements were subject to Massachusetts law. As such, the plaintiffs argued, CMS could not compel arbitration against the class.

Pursuant to Section 1 of the FAA, “contracts of employment” of certain workers engaged in interstate commerce are exempt from the statute’s coverage. It was undisputed that the plaintiffs constituted workers engaged in interstate commerce.  Accordingly, the sole question became whether the CMS agreements constituted “contracts of employment.”

The Appeals Court concluded that because the CMS agreements were not agreement to perform work, they did not constitute “contracts of employment.” In doing so, the Appeals Court rejected the argument made by the plaintiffs that the CMS agreements fell within the FAA exemption because they were required to sign the agreements as a condition of employment. Ultimately, the Appeals Court held that CMS was entitled to compel the plaintiffs to participate in arbitration.

Because Cuneo is unpublished, it is not binding precedent. However, it illustrates the Appeals Court’s strict adherence to the United States Supreme Court’s determination that the FAA exemption should be narrowly construed.

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