Opinion ID: 2738522
Heading Depth: 4
Heading Rank: 2

Heading: Application of the FAAAA to Section 148B

Text: The MDA argues that Section 148B's effective ban on the use of independent contractors renders it preempted under either a facial or an as-applied challenge. The MDA argues that the FAAAA preempts Section 148B on its face due to its logical effect on the same-day delivery industry as a whole. Since individual couriers -18- necessarily act within the usual course of the business of their employers, they must be deemed employees. As such, Section 148B effectively prohibits motor carriers from engaging their couriers as independent contractors. The MDA's amicus curiae,3 the Chamber of Commerce, argues that [a] state law specifying who must provide the service -- an employee of the carrier -- is no different from regulating the service itself. The Attorney General contests the MDA's characterization of the law as one that bans the use of individual independent contractors.4 The MDA also argues that the FAAAA preempts Section 148B due to its impermissible effect on the prices, routes, and services of Xpressman. Preemption is implicated if the statute has a forbidden significant effect on even one motor carrier. See N.H. Motor Transp. Ass'n v. Rowe, 448 F.3d 66, 72-73 (1st Cir. 2006), aff'd on other grounds sub nom. Rowe v. N.H. Motor Transp. Ass'n, 552 U.S. 364 (2008). According to Xpressman, the re-classification 3 We express our appreciation to the several amici for their assistance. 4 At oral argument, the Attorney General argued that Section 148B did not operate as a bar to the classification of individual couriers as independent contractors so long as the delivery company arranged deliveries, and the courier performed the deliveries. This parses the issue too finely. On the facts presently reflected in the record, the couriers deliver packages for delivery companies. There can be no dispute that they act in the course of business for the delivery companies, even if one performs the deliveries and the other arranges the deliveries. -19- of its 58 independent couriers as employees would change the routes offered to customers, would preclude on-demand delivery services, and would drastically increase Xpressman's costs and thus its prices. The Attorney General argues that the MDA misstates or overstates this effect. The district court held that Section 148B's connection to prices, routes and services is insufficient for the FAAAA . . . to preempt it. The district court characterized Section 148B as a generally applicable wage law, and noted, [t]hat a regulation on wages has the potential to impact costs and therefore prices is insufficient to implicate preemption. The district court worried that to find the 'FAAAA preempts wage laws because they may have an indirect impact on [a motor carrier]'s pricing decisions amounts to an invitation to immunize it from all state economic regulation.' In so holding, the district court made several critical errors. First, a statute's potential impact on carriers' prices, routes, and services can be sufficient if it is significant, rather than tenuous, remote, or peripheral. We have previously rejected the contention that empirical evidence is necessary to warrant FAAAA preemption, and allowed courts to look[] to the logical effect that a particular scheme has on the delivery of services or the setting of rates. Rowe, 448 F.3d at 82 n.14. Second, this logical effect can be sufficient even if indirect, as described -20- above. Far from immunizing motor carriers from all state economic regulations, we are following Congress's directive to immunize motor carriers from state regulations that threaten to unravel Congress's purposeful deregulation in this area. Finally, the district court failed to consider the impact of the statute on carriers' routes and services, and not merely their prices. Ultimately, the district court held, the Statute's effect on Xpressman's labor costs is immaterial. Even if the impact was 'significant,' . . . this would not change the fact that the Statute does not relate to the 'movement of property.' In essence, the district court found that its holding that Section 148B did not meet the second requirement, with respect to the transportation of property, obviated the need to investigate its potential success on the first requirement. Since we conclude that the district court erred in its interpretation of the second section of the FAAAA, a determination on the first requirement is now necessary. We express no view on the sufficiency of the evidence before the district court. In opposition to the MDA's motion for summary judgment, the Attorney General had argued that it needed to conduct additional discovery in order to develop facts necessary to its opposition. See Fed. R. Civ. P. 56(d). The district court did not reach the Rule 56(d) motion. The district court ought to decide this matter in the first instance and determine whether the -21- Attorney General has met her burden of establishing the need for additional discovery under Rule 56(d).