Last year’s Spring Newsletter featured an article discussing a pair of decisions holding that the Federal Aviation Administration Authorization Act (the “FAAAA”) preempts the Massachusetts Independent Contractor Law when it comes to freight and package delivery motor carriers. The First Circuit has just unanimously reversed those rulings in two highly anticipated opinions. See Schwann, et al. v. FedEx Ground Package System, Inc., No. 15-1214 (1st Cir. Feb. 22, 2016); Remington, et al. v. J.B. Hunt Transport, Inc., No. 15-1252 (1st Cir. Feb. 22, 2016).

The Schwann and Remington cases arose out of the same basic set of facts: truck-driver plaintiffs claimed that they had been misclassified as independent contractors – rather than employees – in violation of the Massachusetts Independent Contractor Law, M.G.L. c. 149, § 148B. Presiding over both cases, Judge Stearns rejected the misclassification claims on grounds that the FAAAA preempted the “entire” Massachusetts statute. Prompt appeals followed.

The First Circuit affirmed those portions of Judge Stearns’ decisions holding that the FAAAA preempted the second prong of the independent contractor analysis under M.G.L. c. 149, § 148B. Under the Massachusetts statute, workers are presumed to be employees unless three statutory prongs are satisfied, in which case the employee may be classified as an independent contractor. The second prong – the so-called “usual course of business prong” – requires that the service provided by the would-be independent contractor is “performed outside the usual course of business of the employer.” Plaintiff-drivers have frequently focused their misclassification claims on this prong, arguing that motor carriers cannot prove that their drivers perform work outside the motor carriers’ usual course of business.

Addressing this issue, the First Circuit stated that the decision whether to provide a service directly through an employee or alternatively through an independent contractor “is a significant decision in designing and running a business.” As a result,  pplication of the second prong would require a court to “define the degree of integration that a company may employ by mandating that any services deemed ‘usual’ to its course of business be performed by an employee.” According to the court, this is problematic because it “poses a serious potential impediment to the achievement of the FAAAA’s objectives” by requiring a court – “rather than the market participant” – to determine what services a company provides and how it chooses to provide them. Since the Massachusetts statute would “largely foreclose[]” a motor carrier’s method of providing delivery services, the First Circuit concluded that the FAAAA preempted the second prong of M.G.L. c. 149, § 148B, as applied in this set of cases.

However, the preemption analysis did not end there. Parting ways with Judge Stearns, the First Circuit went on to conclude that the second prong was, in fact, severable from Section 148B. Reasoning that the “separated itemization” of the three statutory prongs allows for a “straightforward deletion of one factor without touching the others,” and giving heed to the legislative intent to protect employees against misclassification, the panel concluded that “the legislature’s plain aim in enacting this statute favors two-thirds of this loaf over no loaf at all as applied to motor carriers . . . .” Therefore, the FAAAA’s preemption of the second prong did not equate to a preemption of the “entire” statute. Neither employer in the Schwann and Remington cases addressed FAAAA preemption of the statute’s first and third prongs. As a result, and in light of its severability analysis, the First Circuit also reversed the lower court’s decisions holding that the other two prongs were also preempted by the FAAAA and remanded for further proceedings.

The First Circuit’s decision is expected to change how litigants approach the preemption analysis in motor carrier misclassification cases. Its holding that the second prong of the independent contractor analysis is severable will likely bring the other two prongs into focus for purposes of a FAAAA preemption analysis. For plaintiffs and employers alike, the First Circuit’s decision will likely result in a new wave of issues in an already complex class of litigation.