Opinion ID: 3170660
Heading Depth: 3
Heading Rank: 3

Heading: Application of the FAAAA to the IWPCA

Text: With this background in mind, we turn to the question presented for our review: whether the express-preemption provision of the FAAAA preempts prong two of the definition of employee contained in the IWPCA. There are no bright-line rules to resolve whether a state law is preempted. Instead, we must “decide whether the state law at issue falls on the affirmative or negative side of the preemption line.” S.C. Johnson, 697 F.3d at 550. Because the IWPCA is not specifically directed to motor carriers, the task before us is to determine whether the IWPCA will have a significant impact on the prices, routes, and services that BeavEx offers to its customers. We conclude that it does not. BeavEx asks this court to apply the approach articulated by the First Circuit in MDA I, which it contends leads to the conclusion that a law that requires a motor carrier to classify its couriers as employees instead of independent contractors is preempted by the FAAAA. BeavEx’s reliance on MDA I for Nos. 15-1109 & 15-1110 17 its conclusion is misplaced, and we conclude that MDA I counsels a different result here. Importantly, the Massachusetts statute at issue in MDA I triggers far more employment laws than the employment definition contained in the IWPCA, MDA I, 769 F.3d at 15 n.1; see also MDA II, 2015 WL 4111413, at –6, which led the district court to hold it preempted. We, however, consider the impact that the IWPCA would have on BeavEx’s business model. Empirical evidence is not mandatory for this court to conclude that the IWPCA is preempted. See, e.g. Rowe, 552 U.S. at 373–74 (not relying on empirical evidence to find FAAAA preemption). Instead, we conduct an individualized inquiry that “engage[s] with the real and logical effects of the state statute.” MDA I, 769 F.3d at 20 (emphasis added). The scope of the IWPCA is limited, and Plaintiffs are only seeking to enforce the provision prohibiting wage deductions. BeavEx has not cited any authority showing that the IWPCA would trigger state employment laws to the extent of those in MDA I. Because the scope of the IWPCA is limited, its logical effect is necessarily more limited than the statute at issue in MDA I. We find this distinction relevant and conclude that the impact of the IWPCA is too “tenuous, remote, or peripheral” to warrant FAAAA preemption. Furthermore, the IWPCA is precisely the type of background labor law that this court alluded to in S.C. Johnson—a law that only indirectly affects prices by raising costs. The IWPCA is a law that regulates a labor input and “operate[s] one or more steps away from the moment at which the firm offers its customers a service for a particular price.” S.C. Johnson, 697 F.3d at 558 (emphasis added). In other words, the IWPCA regulates the motor carrier as an employer, and any 18 Nos. 15-1109 & 15-1110 indirect effect on prices is too tenuous, remote, or peripheral. Cf. DiFiore, 646 F.3d at 87 (“Importantly, the tips law does more than simply regulate the employment relationship between the skycaps and the airline.”); Tobin v. Fed. Express Corp., 775 F.3d 448, 456 (1st Cir. 2014) (distinguishing between state laws that regulate “how [a] service is performed (preempted) and those that regulate how an airline behaves as an employer or proprietor (not preempted)” (quotation marks omitted)). That is not to say that we are adopting “a categorical rule exempting from preemption all generally applicable state labor laws,” MDA I, 769 F.3d at 20, but rather, we conclude that the IWPCA’s effect on the cost of labor is too tenuous, remote, or peripheral to have a significant impact on BeavEx’s setting of prices for its consumers. BeavEx asserts that if the IWPCA is not preempted, it would be subject to numerous legal obligations toward those couriers that do not currently apply, including minimum wage, maximum hour, and overtime requirements, mandated payroll tax payments and withholding requirements, mandated workers’ compensation and medical insurance, and mandat- ed contributions to state unemployment insurance, in addition to remedies specifically requested in Plaintiffs’ complaint, which include requirement [sic] BeavEx to purchase or lease, store, and maintain automobiles for its couriers. (Appellant’s Br. at 16.) Conspicuously absent from BeavEx’s parade of horrors is any citation of authority showing that it would be required Nos. 15-1109 & 15-1110 19 to comply with this slew of federal and state laws. We do not accept BeavEx’s bare assertion that its couriers will need to be classified as employees for all purposes. Instead, the only substantive requirement of the IWPCA that Plaintiffs seek to enforce is that BeavEx refrain from making deductions from its couriers’ pay without “express written consent of the employee, given freely at the time the deduction is made.” 820 ILCS 115/9. As a result of our holding, BeavEx will have to choose whether to absorb the costs it previously deducted or pass them along to its couriers through lower wages or to its customers through higher prices. We do not see, however, how the increased labor cost will have a significant impact on the prices that BeavEx offers to its customers. BeavEx has offered no evidence to persuade us differently. In fact, the only numerical figure BeavEx alleges is that the human resources department would incur an additional cost of $185,000 per year to employ a human resources professional to oversee the Illinois workforce. BeavEx has offered no frame of reference upon which we could conclude that this $185,000 would significantly impact BeavEx’s prices. Even less obvious is any significant impact that prohibiting deductions would have on BeavEx’s routes or services. We agree with BeavEx that reclassifying its couriers as employees for all purposes could undermine its ability to continue offering on-demand delivery services. When BeavEx gets on-demand orders from customers, it contacts a courier and offers the delivery. The courier is then free to accept or decline. In order to offer the same on-demand service with an employee workforce, BeavEx would have to pay couriers to be “on call,” and couriers would be unable to pursue oth20 Nos. 15-1109 & 15-1110 er work opportunities during their on-call time. Such a requirement could have a significant impact on the ability of BeavEx to offer on-demand services, which its customers currently desire. We do not see, however, how ruling that the IWPCA applies to BeavEx’s couriers would create that situation. BeavEx has offered no specific evidence of the effect of the IWPCA on its business model, instead preferring to rely on conclusory allegations that compliance with the IWCPA will require BeavEx to switch its entire business model from independent-contractor-based to employee-based. We see no basis for concluding that the IWPCA would require that change given that the federal employment laws and other state labor laws have different tests for employment status. See, e.g., 26 U.S.C. § 3121(d)(2) (for purposes of the federal tax code, an employee is “any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee”); Ill. Admin. Code tit. 56, § 210.110 (providing six factors to determine if an individual is an employee for purposes of the Illinois Minimum Wage Law, 820 ILCS 105). BeavEx also raises concerns that if we do not hold that the IWPCA is preempted, it will “require motor carriers to change their business practices from state to state to comply with a patchwork of random state-level requirements.” (Appellant’s Br. at 15.) We find the Supreme Court’s decision in Northwest instructive. In that case, the petitioners argued that all state-law breach-of-implied-covenant claims must be preempted; otherwise, “airlines [would] be faced with a baffling patchwork of rules, and the deregulatory aim of the ADA will be frustrated.” Northwest, 134 S. Ct. at 1433. The Nos. 15-1109 & 15-1110 21 Court rejected that argument, holding that a State’s impliedcovenant laws are not preempted if the State’s law “permits an airline to contract around those rules.” Id. The Court added, “[w]hile the inclusion of such a provision may impose transaction costs and presumably would not enhance the attractiveness of the program, an airline can decide whether the benefits of such a provision are worth the potential costs.” Id. The IWPCA benefits from this same flexibility—the IWPCA’s prohibition on deductions from wages can be contracted around by “express written consent of the employee, given freely at the time the deduction is made.” 820 ILCS 115/9. It is up to BeavEx to decide whether to stop making deductions or absorb the transaction costs of acquiring consent. What is clear is that BeavEx has not demonstrated to this court that preventing it from deducting from its couriers’ wages or the transaction costs associated with acquiring consent to do so would have a significant impact related to its prices, routes, or services. Because we hold that the IWPCA is not “related to a price, route, or service of any motor carrier,” we decline to address the second prong of the preemption analysis, which requires that the state law be related to a price, route, or service “with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1); see also Dan’s City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769, 1778 (2013) (“[T]he addition of the words ‘with respect to the transportation of property’ … massively limits the scope of preemption ordered by the FAAAA.” (quotation marks omitted)). 22 Nos. 15-1109 & 15-1110