Madrigal v. Ferguson
What’s at Stake
Certain workers cannot be compelled into arbitrating disputes with employers under the Federal Arbitration Act (FAA). Specifically, the statute exempts the contracts of workers “engaged in…interstate commerce.” Since our victory in the U.S. Supreme Court in Oliveria v. New Prime, Inc., the scope of this exemption has been the focus of many more cases. When it comes to applying the exemption to delivery drivers traveling only intrastate (never crossing state lines), federal courts have generally drawn the line between drivers whose deliveries are the last leg of a good’s interstate or international journey and drivers who function more as local couriers, such as delivering resturant meals or drycleaning. The FAA exemption has widely been applied to the “last leg” drivers but not “local courier” drivers.
Summary
From 2007 until 2023, Jose Madrigal worked as a delivery driver for Ferguson, one of the country’s largest plumbing and HVAC products retailers. He delivered plumbing and HVAC supplies and appliances from Ferguson’s distribution center in Pomona, California to local plumbing companies, construction sites, and Ferguson retail branches. In late 2023, Mr. Madrigal brought a putative class action against Ferguson, alleging that the company violated California wage and hour law by, among other things, failing to pay for all hours worked, failing to pay overtime and minimum wage, failing to provide meal and rest breaks, and failing to reimburse employees for business expenses.
Ferguson moved to compel Mr. Madrigal’s claims into individual arbitration based on an employment agreement Ferguson says it mailed to him well after he started. Though Mr. Madrigal disputed that he had agreed to arbitrate, the district court found that the mailed agreement was enough to show an arbitration agreement had been formed. The district court, however, then went on to hold that Mr. Madrigal’s agreement was exempt from the FAA and could proceed in court because he was a worker engaged in interstate commerce. And as a matter of California state law, the district court found the agreement’s prohibition of class actions was unenforceable and denied Ferguson’s motion to compel individual arbitration.
Ferguson has appealed this decision to the U.S. Court of Appeals for the Ninth Circuit, solely on the question of whether Mr. Madrigal’s contract is exempt from the FAA. It has conceded that if Mr. Madrigal’s contract is exempt, his case can proceed as a putative class action in court.
Core Legal Problem
Public Justice is one of the leading experts on the primary issue on appeal—the application of the FAA exemption and the ability of companies to compel workers into arbitration. Here, Ferguson is seeking to narrow the exemption in ways that are not supported by the text of the statute or by case law, and we are working to make sure the Ninth Circuit does not adopt its arguments.