Schwann v. Fedex Ground Package System, Inc. , 813 F.3d 429 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1214
CLAYTON SCHWANN, individually and on behalf of a class of all
others similarly situated; THOMAS LEDUC, individually and on
behalf of a class of all others similarly situated; RAMON
HELEODORO, individually and on behalf of a class of all others
similarly situated; JAMES E. DUGGAN, individually and on behalf
of a class of all others similarly situated; ERIC VITALE,
individually and on behalf of a class of all others similarly
situated; MUCHIRAHONDO PHINNIAS, individually and on behalf of a
class of all others similarly situated; TEMISTOCLES SANTOS,
individually and on behalf of a class of all others similarly
situated; ROBERT SANGSTER, individually and on behalf of a class
of all others similarly situated; JEFF BAYLIES; LAWRENCE ADAMS,
Plaintiffs, Appellants,
MARVIN SANTIAGO, individually and on behalf of a class of all
others similarly situated; MANUEL MONTROND, individually and on
behalf of a class of all others similarly; SERRULO FERNANDEZ
DEJESUS, individually and on behalf of a class of all others
similarly situated; WAN PYO CONG, individually and on behalf of
a class of all others similarly situated; LEON HECTOR,
Plaintiffs,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., d/b/a FEDEX HOME DELIVERY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Stahl, and Kayatta,
Circuit Judges.
Harold L. Lichten, with whom Shannon Liss-Riordan and Lichten
& Liss-Riordan, P.C. were on brief, for appellants.
Peter Sacks, State Solicitor, with whom Maura Healey,
Attorney General of Massachusetts, and Elizabeth N. Dewar,
Assistant State Solicitor, were on brief, for the Massachusetts
Attorney General, amicus curiae.
William M. Jay, with whom James C. Rehnquist, Kate E.
MacLeman, and Goodwin Procter LLP, were on brief, for appellee.
February 22, 2016
KAYATTA, Circuit Judge. Plaintiffs here are individuals
who contracted with Defendant FedEx Ground Package System, Inc.
("FedEx") to provide so-called first-and-last mile pick-up and
delivery services. They claim that FedEx should have treated and
paid them as employees in certain respects, rather than as
independent contractors, because FedEx cannot satisfy all three
necessary requirements under the Massachusetts Independent
Contractor Statute, Mass. Gen. Laws ch. 149, § 148B(a) (the
"Massachusetts Statute"). We find that the express preemption
provision of the Federal Aviation Administration Authorization Act
of 1994 ("FAAAA"), 49 U.S.C. § 14501(c)(1), preempts the
application of one of those requirements to FedEx. We also find
that the preempted requirement is severable from the two remaining
requirements of the Massachusetts Statute, and we remand for
further consideration of whether Plaintiffs may prevail on their
claims under Massachusetts law by relying on either of those
requirements.
I.
A. Relevant Facts
FedEx is a federally registered motor carrier that is
licensed to provide nationwide package pick-up, transportation,
and delivery services. As relevant to the claims in this case,
FedEx did not itself customarily perform what is called "first-
and-last mile" pick-up and delivery services to customers.
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Instead, it contracted with individuals such as Plaintiffs whom it
treated as independent contractors to perform these services.
FedEx's relationship with these individuals was governed by an
Operating Agreement ("OA").
Under the OA, each individual contractor acquired an
exclusive and transferable interest in customer accounts located
in a designated geographical area in return for assuming the
responsibility of providing daily pick-up and delivery services
for FedEx in that area. The OA contemplated that such services
may be performed by persons other than the individual contractor,
and established a financial structure by which the contractors
were compensated. The OA also provided that FedEx shall not have
authority "to prescribe hours of work, whether or when the
Contractor is to take breaks, what route the Contractor is to
follow, or other details of performance." The contractor bore all
costs and expenses incurred in providing the pick-up and delivery
services, including but not limited to those associated with
obtaining and using a suitable vehicle, fuel, compliant
communications equipment, uniforms, and insurance. At least some
of these costs and expenses were defrayed through forms of
supplemental compensation paid to the contractor under the OA's
financial structure.
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B. State Law
Plaintiffs contend that FedEx misclassified them as
independent contractors and seek damages for loss of wages,
improper wage deductions, and loss of benefits under the
Massachusetts Statute and the Massachusetts Wage Act (the "Wage
Act"), Mass. Gen. Laws ch. 149, §§ 148, 150, as well as attorneys'
fees.1
The relevant text of the Massachusetts Statute provides
that "an individual performing any service . . . shall be
considered to be an employee" unless:
(1) the individual is free from control and
direction in connection with the performance
of the service, both under his contract for
the performance of service and in fact; and
(2) the service is performed outside the
usual course of the business of the employer;
and,
(3) the individual is customarily engaged in
an independently established trade,
occupation, profession or business of the same
nature as that involved in the service
performed.
Id. § 148B(a). For ease of reference, we follow the parties in
referring to the three numbered subsections (1)–(3) as "Prongs 1,
2, and 3."
1
Plaintiffs' complaint also alleged an unjust enrichment
claim, the dismissal of which Plaintiffs do not challenge.
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If Prong 2 is not preempted, and a court deems, as the
district court did in this case, that the service Plaintiffs
rendered was not "outside the usual course of business of [FedEx],"
then Plaintiffs "shall be considered to be an employee" "[f]or the
purpose of [Chapter 149] and [C]hapter 151." Id. Under those
chapters, an employer must provide certain benefits to its
employees, including various days off, see id. § 47, parental
leave, id. § 105D, work-break benefits, id. § 100, and a minimum
wage, Mass. Gen. Laws ch. 151, § 1. The employer must also track
and record hours worked and amounts paid. Id. § 15; Mass. Gen.
Laws ch. 149, § 52. According to the Massachusetts Attorney
General, under Plaintiffs' proposed application of the
Massachusetts Statute, Chapter 149 would require FedEx to pay for
or reimburse all out-of-pocket expenses incurred for the benefit
of FedEx such as the maintenance and depreciation of the vehicles
they used to perform their services. The statute also bars the
employer from excepting itself from this mandate by contract.
Camara v. Attorney General, 941 N.E.2d 1118, 1121 (Mass. 2011);
Mass. Gen. Laws ch. 149, § 148.2
2 In their original briefing and in the supplemental briefing
we invited, the parties spar over which other state law
requirements are triggered by a finding of employee status under
the Massachusetts Statute and what effect those requirements would
have on FedEx's prices, routes, and services. In deciding the
issues raised on this appeal, we have no occasion to resolve this
dispute concerning the full range of state law requirements
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C. Procedural History
After discovery and a few procedural skirmishes,
Plaintiffs pursued a motion for partial summary judgment arguing
that they were misclassified as independent contractors because
FedEx failed to satisfy Prongs 2 and 3 of the Massachusetts
Statute. FedEx opposed the motion by arguing that there existed
genuine issues of material fact relevant to whether Plaintiffs
were employees of FedEx under Prongs 2 and 3. FedEx also filed
its own summary judgment motion requesting dismissal of all counts.
In its memorandum in support of that motion, FedEx argued that all
of Plaintiffs' claims were preempted by the FAAAA.
In reply to Plaintiffs' opposition to its summary
judgment motion, FedEx scaled back the scope of its preemption
argument, eschewing any argument that Prongs 1 and 3 of the
Massachusetts Statute were preempted. FedEx, rather, clarified in
its reply brief that its motion instead "is based on the specific,
and unique, effects of § 148B's 'usual course of business' factor,"
while reminding the court that it had "expressly stated in its
initial brief that it does not oppose severance of the 'usual
course of business' factor from § 148B if that factor is deemed to
be preempted." Therefore, argued FedEx, "if the 'usual course of
business' factor is found preempted (and the Court finds it to be
triggered by a finding that a person is an employee under
§ 148B(a).
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severable), then summary judgment on that factor should be granted
and the case would proceed to trial" on the issues of whether
Plaintiffs were employees of FedEx under Prongs 1 and 3.
The district court initially granted Plaintiffs' motion
for partial summary judgment under Prong 2. Schwann v. FedEx
Ground Package Sys., Inc., No. 11-11094, 2013 WL 3353776, at *7
(D. Mass. July 3, 2013). It found that FedEx could not satisfy
Prong 2 because the pick-up and delivery services performed by
Plaintiffs were not outside FedEx's "usual course of business."3
Id. at *6. The district court also held that the Massachusetts
Statute was not preempted by the express preemption provision of
the FAAAA because the state law (1) did not sufficiently relate to
FedEx's prices, routes, or services, and (2) did not concern a
motor carrier's transportation of property. Id. at *4.4
The district court then certified several state law
questions concerning damages under the Wage Act to the Supreme
Judicial Court of Massachusetts ("SJC") and stayed the case pending
a response. During the time the case was stayed, we decided
Massachusetts Delivery Ass'n v. Coakley, 769 F.3d 11 (1st Cir.
3 In light of this finding, the district court explained that
it did not need to reach Plaintiffs' arguments under Prong 3.
Schwann, 2013 WL 3353776, at *6.
4 The district court also entered judgment for FedEx on the
unjust enrichment claim, finding that damages under that theory of
liability would duplicate an award under the Wage Act. Id.
Plaintiffs do not challenge that ruling on this appeal.
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2014) ("MDA"). In MDA, we reversed and remanded a district court
decision that had found Prong 2 not preempted by the FAAAA. Id.
at 14. We ruled that the district court in that case had applied
an unduly narrow interpretation of the FAAAA's express preemption
provision. Id.
The district court in this case then called for
supplemental briefing to address both the import of MDA and
Plaintiffs' summary judgment arguments under Prong 3 of the
Massachusetts Statute. In their opening supplemental brief,
Plaintiffs argued that our decision in MDA did not affect the
district court's finding that the Massachusetts Statute was not
preempted by the FAAAA. Plaintiffs also argued that, even were
Prong 2 preempted, the court should find on summary judgment that
they were employees of FedEx based on Prong 3.5 In its opening
supplemental brief, FedEx argued that MDA required the court to
vacate its previous ruling of non-preemption and to find that
Prong 2 was preempted.6 FedEx also disputed Plaintiffs'
interpretation of Prong 3 and reiterated that there existed genuine
5
Exceeding the permission granted by the district court's
supplemental briefing request, Plaintiffs also advanced for the
first time the argument that the district court could find on
summary judgment that they were employees of FedEx based on Prong
1 of the statute.
6 While FedEx in this supplemental brief generally referred
to "§ 148B" rather than "§ 148B(a)(2)" or "Prong 2," its arguments
echoed those that it made on summary judgment, in which it
specified (in its reply brief) that its preemption argument only
pertained to Prong 2 of the statute.
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issues of material fact relevant to whether Plaintiffs were
employees of FedEx under that prong. Then, in its reply to
Plaintiffs' supplemental brief, FedEx argued for the first time
that Prong 2, if preempted, was not severable from the remainder
of the Massachusetts Statute.
Thereafter the district court issued a second decision
on the parties' summary judgment motions in which it (1) withdrew
its prior opinion insofar as it granted summary judgment to
Plaintiffs on Count I and (2) granted FedEx summary judgment on
all counts. Schwann v. FedEx Ground Package Sys., Inc., No. 11-
11094, 2015 WL 501512, at *2 (D. Mass. Feb. 5, 2015). Tracking
MDA, the district court emphasized that "a statute's 'potential'
impact on carriers' prices, routes, and services can be sufficient
[to trigger preemption] if it is significant, rather than tenuous,
remote, or peripheral," and that this impact need not by proven by
empirical evidence, but may be proven by "the logical effect that
a particular scheme has on the delivery of services." Id. at *1
(quoting MDA, 769 F.3d at 21). After considering "such logical
(if indirect) effects," id., the district court found that the
Massachusetts Statute "unquestionably ha[s] an impact on 'price,
route[s], [and] services' by in effect proscribing the carrier’s
preferred business model," id. (second and third alterations in
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original) (quoting 49 U.S.C. § 14501(c)(1)).7 The district court
thus found that Prong 2 was preempted by the FAAAA. Id. at *2.
The district court next turned to Plaintiffs' summary
judgment arguments under Prong 3. Id. It held that Prong 2 was
not severable from the Massachusetts Statute as a whole because
the court "has no way of knowing whether the Legislature . . . would
have chosen to rewrite the statute less restrictively to consist
of only the first and third prongs," and thus "the entire statute
must be treated as preempted." Id. The district court then added,
sua sponte, a conclusion that FedEx itself was not advocating:
that application of Prongs 1 and 3 against motor carriers would
also be preempted by the FAAAA because "motor carriers would be
impacted by forbidding the preferred business model." Id.
Plaintiffs appealed. We now review the district court's
preemption and severability holdings de novo. See MDA, 769 F.3d
at 17.
II.
The FAAAA's express preemption provision provides that
all state laws that "relate[] to a price, route, or service of any
motor carrier . . . with respect to the transportation of property"
7 The district court also recognized that in MDA, "a case
virtually identical to this one in its relevant respects," we held
that the Massachusetts Statute concerns a motor carrier's
transportation of property. Schwann, 2015 WL 501512, at *1-2.
Plaintiffs do not contest this aspect of the district court's
ruling.
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are preempted. 49 U.S.C. § 14501(c)(1). Congress, in writing the
portion of this clause that is pertinent to this appeal, copied
the language of the preemption clause of the Airline Deregulation
Act of 1978 ("ADA"), 49 U.S.C. § 41713(b)(1). Rowe v. N.H. Motor
Transp. Ass'n, 552 U.S. 364, 370 (2008). It did so in order to
adopt "the broad preemption interpretation [of the ADA] adopted by
the United States Supreme Court in [Morales v. Trans World
Airlines, Inc., 504 U.S. 374 (1992)]." Id. (citing H.R. Conf.
Rep. 103–677, at 83). As we observed in MDA, the resulting scope
of FAAAA preemption is therefore both informed by interpretations
of ADA preemption and, like ADA preemption, is "purposely
expansive." MDA, 769 F.3d at 18.
The Supreme Court has identified the dual objectives
that account for this broad reach: to "ensure that the States
would not undo federal deregulation with regulation of their own,"
Rowe, 552 U.S. at 368 (quoting Morales, 504 U.S. at 378); and to
avoid "a patchwork of state service-determining laws, rules, and
regulations," id. at 373. In this manner, Congress sought to
"help[] ensure transportation rates, routes, and services that
reflect 'maximum reliance on competitive market forces,' thereby
stimulating 'efficiency, innovation, and low prices,' as well as
'variety' and 'quality.'" Id. at 371 (quoting Morales, 504 U.S.
at 378).
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Section 14501(c)(1) preemption may therefore occur "even
if a state law's effect on rates, routes, or services 'is only
indirect,'" id. at 370 (quoting Morales, 504 U.S. at 386), and
applies "at least where state laws have a 'significant impact'
related to Congress' deregulatory and pre-emption-related
objectives," id. at 371 (quoting Morales, 504 U.S. at 390). We
summarized these principles in MDA by explaining that "a state
statute is preempted if it expressly references, or has a
significant impact on, carriers' prices, routes, or services."
MDA, 769 F.3d at 17–18.
Congress itself acknowledged the breadth of this
language by perceiving a need to include paragraph (c)(2) of the
statute to "restrict" from its otherwise broad preemptive scope
certain specified areas traditionally governed by the states, such
as "the safety regulatory authority of a State with respect to
motor vehicles" and "the authority of a State to impose highway
route controls or limitations." 49 U.S.C. § 14501(c)(2). The
Supreme Court has explained that "[t]he exceptions to
§ 14501(c)(1)'s general rule of preemption identify matters a State
may regulate when it would otherwise be precluded from doing so."
Dan's City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769, 1780 (2013).
There is, of course, "a necessary limit to the scope of
FAAAA preemption." MDA, 769 F.3d at 18. After all, in a broad
sense, everything "relates to" everything else in some manner.
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See N.Y. State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 655 (1995) ("If 'relate to' were
taken to extend to the furthest stretch of its indeterminacy, then
for all practical purposes pre-emption would never run its
course . . . ."). Case law therefore excludes from the otherwise
broad reach of § 14501(c)(1) those state laws that have only a
"tenuous, remote, or peripheral" impact on prices, routes, or
services. See Rowe, 552 U.S. at 371 (quoting Morales, 504 U.S. at
390). As examples of such unpreempted laws, the Supreme Court has
pointed to laws against gambling and prostitution, Morales, 504
U.S. at 390, and "state regulation that broadly prohibits certain
forms of conduct and affects, say, truckdrivers, only in their
capacity as members of the public (e.g., a prohibition on smoking
in certain public places)," Rowe 552 U.S. at 375. These examples
demonstrate both that there is a limit to the preemptive scope of
§ 14501(c)(1) and that one must move quite far afield to
confidently reach that limit. See DiFiore v. Am. Airlines, Inc.,
646 F.3d 81, 86-87 (1st Cir. 2011). Exactly where the boundary
lies between permissible and impermissible state regulation is not
entirely clear.
In MDA, the district court failed to apply this broad
interpretation of § 14501(c)(1) in finding that, based on facts
similar to those in this case, Prong 2's effects did not
sufficiently impact a motor carrier's prices, routes, or services.
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MDA, 769 F.3d at 14. In our decision vacating the district court's
order, we noted that "a statute's 'potential' impact on carriers'
prices, routes, and services" need not be proven by empirical
evidence; rather, courts may "look[ ] to the logical effect that
a particular scheme has on the delivery of services." Id. at 21
(alteration in original) (quoting N.H. Motor Transp. Ass'n v. Rowe,
448 F.3d 66, 82 n.14 (1st Cir. 2006), aff'd, Rowe, 552 U.S. 364).
This logical effect, we said, "can be sufficient even if indirect"
so that motor carriers can be immunized "from state regulations
that threaten to unravel Congress's purposeful deregulation in
this area." Id. Because the district court in MDA ultimately
based its holding on an erroneous finding that § 14501(c)(1)'s
"with respect to the transportation of property" requirement had
not been satisfied, we remanded that case to the district court so
that it could decide, consistent with our opinion, whether the
"related to" standard was met. Id. at 17–22.
We now pick up where MDA left off, as we have a district
court's considered application of § 14501(c)(1)'s "related to"
standard to Prong 2 of the Massachusetts Statute. We begin by
defining precisely the question before us. Whether Prong 2 is
facially preempted in the abstract is not the question. Unlike
the provisions of the Maine state statute in Rowe specifically
targeting the services provided by tobacco carriers, 552 U.S. at
368, 373, the Massachusetts Statute is a generally applicable law
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regulating the relationships between businesses and persons who
perform services for those businesses, Mass. Gen. Laws ch. 149,
§ 148B(a). Thus, our preemption analysis in this case trains
instead upon the manner in which Prong 2 of the Massachusetts
Statute would apply to FedEx's operations. In this respect, our
inquiry is analogous to that undertaken by the Supreme Court in
Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422 (2014), where the
question before it was not whether the state common law implied
covenant theory was facially preempted, but whether ADA preemption
precluded the plaintiffs from employing that theory to add to the
terms of a contract governing an airline's frequent flyer program,
id. at 1427.
Plaintiffs' successful reliance on Prong 2 in this case
would necessarily require that we first look at the "service"
performed by Plaintiffs on behalf of FedEx, that we next determine
that that service is not "outside the usual course of the business
of [FedEx]," and that we then, in substance, bar FedEx from using
any individuals as full-fledged independent contractors to perform
that service. See Mass. Gen. Laws ch. 149, § 148B(a)(2). For the
following reasons, we find that Prong 2, if applied in this way,
would "relate[] to" the "service of a motor carrier . . . with
respect to the transportation of property." 49 U.S.C.
§ 14501(c)(1).
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For starters, we observe the directly referential
relationship between Plaintiffs' application of Prong 2 and
FedEx's motor carrier services. By honing in on a "service" and
then directing the court to determine whether that service fits
within the "usual course of business of [FedEx]," see Mass. Gen.
Laws § 148B(a)(2), Prong 2 requires a judicial determination of
the extent and types of motor carrier services that FedEx provides.
The text of Prong 2 as applied in this way thus "expressly
references," MDA, 769 F.3d at 17, FedEx's motor carrier services.
Prong 2 also stands as something of an anomaly because
it makes any person who performs a service within the usual course
of the enterprise's business an employee for state wage law
purposes. By contrast, under the federal Fair Labor Standards
Act, 29 U.S.C. §§ 201-19, and the law of many states, the
relationship between the service performed and the usual course of
the enterprise's business is simply one among many factors to be
considered, see, e.g., Baystate Alt. Staffing, Inc. v. Herman, 163
F.3d 668, 675 n.5 (1st Cir. 1998); Empire Star Mines Co. v. Cal.
Emp't Comm'n, 168 P.2d 686, 692 (Cal. 1946), overruled on other
grounds by People v. Sims, 651 P.2d 321, 328 n.8 (Cal. 1982).
Plaintiffs point to, at most, only a small number of states that
have, for wage law purposes, enacted a standard similar to Prong 2.
Prong 2, as Plaintiffs would apply it, thus requires FedEx to use
persons who are employees to perform first-and-last mile pick-up
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and delivery services even if those persons could be deemed
independent contractors under federal law and the law of many
states.
This relatively novel aspect of Prong 2 runs counter to
Congress's purpose to avoid "a patchwork of state service-
determining laws, rules, and regulations" that it determined were
better left to the competitive marketplace. Rowe, 552 U.S. at
373. Additionally, that same novelty cuts against any argument
that Prong 2 is simply a type of pre-existing and customary
manifestation of the state's police power that we might assume
Congress intended to leave untouched.
The regulatory interference posed by Plaintiffs'
application of Prong 2 is not peripheral. The decision whether to
provide a service directly, with one's own employee, or to procure
the services of an independent contractor is a significant decision
in designing and running a business. As this case shows, that
decision implicates the way in which a company chooses to allocate
its resources and incentivize those persons providing the service.
Imagine, for example, state legislation that barred any company
from vertically integrating (that is, performing all connected
services itself through its own employees). Legislation of that
type would directly and substantially restrain the free-market
pursuit of perceived efficiencies and competitive advantage that
some competitors might otherwise choose to pursue in designing the
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manner in which they perform their services to meet market demands.
Prong 2, as Plaintiffs propose to apply it, is simply the flip
side of this same type of market interference: It requires 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. Such an application of state
law poses a serious potential impediment to the achievement of the
FAAAA's objectives because a court, rather than the market
participant, would ultimately determine what services that company
provides and how it chooses to provide them.
This case serves as a good example. A company that
transports property might opt to transport the property itself
from pick-up to delivery. Or it might opt to run only a portion
of the route itself, contracting with others to transport the
property for some portion of the route. In other words, a company
might provide transportation, or it might provide for
transportation by others. FedEx opted to do both. It had its own
employees transport the packages most of the way, but left local
pick-up and delivery to individuals who (1) purchased the right to
service certain FedEx customer accounts in an area, (2) bore the
expense for servicing such accounts, (3) received compensation
based on a formula that accounted for the number of packages
delivered, and (4) reserved for themselves the right to decide
what route to follow in making deliveries. Through such an
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arrangement, FedEx provided these individuals with an economic
incentive to keep costs low, to deliver packages efficiently, and
to provide excellent customer service. [See R. 556, ¶ 12.]
This method of providing for delivery services would be
largely foreclosed by Plaintiffs' application of Prong 2 if a court
determined that first-and-last mile transportation was "the usual
course of the business of [FedEx]." As the Attorney General
acknowledged in a bit of an understatement, "§ 148B's Prong 2 makes
it quite difficult for carriers like FedEx to treat individual
drivers as independent contractors, rather than employees [for
state wage law purposes]." And the parties as well as the Attorney
General admit that because Prong 2 would mandate that FedEx
classify these individual contractors as employees, FedEx would be
required to reimburse them for business-related expenses. The
logical effect of this requirement would thus preclude FedEx from
providing for first-and-last mile pick-up and delivery services
through an independent person who bears the economic risk
associated with any inefficiencies in performance.
This regulatory prohibition would also logically be
expected to have a significant impact on the actual routes followed
for the pick-up and delivery of packages. FedEx through its
employees did not fix or determine the precise route for the first-
and-last mile of pick-up and delivery. Rather, FedEx delegated
the precise design of the route to the contractor, who assumed the
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risks and benefits of increased or decreased efficiencies achieved
by the selected routes. It is reasonable to conclude that
employees would have a different array of incentives that could
render their selection of routes less efficient, undercutting one
of Congress's express goals in crafting an express preemption
proviso. See Rowe, 552 U.S. at 371 (describing "Congress'
overarching goal as helping ensure transportation rates, routes,
and services that reflect 'maximum reliance on competitive market
forces,' thereby stimulating 'efficiency, innovation, and low
prices,' as well as 'variety' and 'quality'" (quoting Morales, 504
U.S. at 378)).
Perhaps recognizing that this result is incompatible
with § 14501(c)(1), Plaintiffs argue that such an effect does not
necessarily follow from the application of Prong 2. Instead,
Plaintiffs argue that FedEx may continue to use an incentive-based
arrangement by paying employee drivers, for instance, on a "per-
package" or "per-stop" basis or providing them with performance-
based bonuses. [Id.] Of course, such incentive structures would
lack the fuller selective force of the structure chosen by FedEx,
which guarantees no net income for the services rendered. More
importantly, we find the interference inherent in dictating such
an approach to exceed the interference found excessive in DiFiore,
where the necessity of a solution in that case highlighted how the
state tips law "require[d] changes in the way the service is
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provided." DiFiore, 646 F.3d at 88. Here, too, Plaintiffs'
suggestion that FedEx change the manner in which it incentivizes
efficient delivery simply highlights the tangible manner in which
Plaintiffs' proposed application of Prong 2 would significantly
affect how FedEx provides good and efficient service. This
interference, in combination with the points we have already
discussed, demonstrates that application of Prong 2 in this case
would transgress Congress's "view that the best interests of [motor
carrier service beneficiaries] are most effectively promoted, in
the main, by allowing the free market to operate." Northwest, 134
S. Ct. at 1433.8
We do not hold that FedEx has free rein to classify
workers by fiat as independent contractors. In line with our
explanation in DiFiore, motor carriers are not exempt "from state
taxes, state lawsuits of many kinds, and perhaps most other state
8 In reaching our conclusion, we considered the recent Seventh
Circuit decision in Costello v. BeavEx, Inc., Nos. 15–1109, 15–
1110, 2016 WL 212797 (7th Cir. Jan. 19, 2016). There, the Court
distinguished the Massachusetts statute at issue in MDA from the
Illinois statute before it in holding that the latter was not
preempted by the FAAAA. Id. at *8-10. Important to the Court's
decision were the carrier's ability under Illinois law to contract
around the state rule prohibiting deductions from wages, the lesser
scope of laws implicated by application of the challenged state
independent contractor statute, and the carrier's failure to show
that application of the law would require a change in the services
that the carrier itself provides. Id. We note, too, that
presumably for these reasons the Seventh Circuit did not consider
the significance of the statute's requirement that the court define
the carrier's scope of business, or the potential effects on routes
of any binding change on incentive structures.
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regulation of any consequence." 646 F.3d at 89. Such state laws
that are more or less nationally uniform, and therefore pose no
patchwork problem, or that have less of a reference to and effect
on a carrier's service and routes pose closer questions than that
presented in this case. Completing the analysis we began in MDA,
we hold only that Prong 2 as Plaintiffs propose to apply it
sufficiently "relate[s] to" FedEx's service and routes and is thus
preempted by § 14501(c)(1).
III.
Our finding that Prong 2 is preempted as applied to FedEx
in this case requires us to decide next whether the district court
correctly held that this preempted prong is not severable from
Prongs 1 and 3 of the Massachusetts Statute. The answer to this
question is controlled by state law. See Ackerley Commc'ns of
Mass., Inc. v. City of Cambridge, 135 F.3d 210, 215 (1st Cir.
1998).
In Massachusetts, "[t]he ultimate question on
severability . . . is the intent of the Legislature." Peterson v.
Comm'r of Revenue, 825 N.E.2d 1029, 1038 (Mass. 2005). "We must
[therefore] seek to ascertain whether the Legislature would have
enacted the particular bill without the [invalid] provision, or
whether, in the absence of the [invalid] provision, the Legislature
would have preferred that the bill have no effect at all." Id.
(internal quotation marks and citations omitted). Guiding this
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inquiry is a well-established judicial preference in favor of
severability and a recognition that "the Legislature has announced
its own preference in favor of severability" as well. Id.; see
also Mass. Gen. Laws ch. 4, § 6 ("The provisions of any statute
shall be deemed severable, and if any part of any statute shall be
adjudged unconstitutional or invalid, such judgment shall not
affect other valid parts thereof.").
In divining legislative intent, Massachusetts courts
consider whether the structure of the statute allows the valid
provisions to stand independent of the invalid, or whether the
provisions are so entwined that "the Legislature could not have
intended that the part otherwise valid should take effect without
the invalid part." Murphy v. Comm'r of the Dep't of Indus.
Accidents, 635 N.E.2d 1180, 1183 (Mass. 1994) (quoting Mass.
Wholesalers of Malt Beverages, Inc. v. Commonwealth, 609 N.E.2d
67, 72 (Mass. 1993)).9
Accordingly, we first look to the structure of § 148B(a)
to determine whether Prong 2 is capable of separation from the
remainder of the statute, or instead is so "entwined" that "the
9 Massachusetts courts also consider a statute's legislative
history. See Peterson, 825 N.E.2d at 1037–39. FedEx asks that we
interpret the legislative history of the Massachusetts Statute,
including a 2004 amendment which eliminated an alternative method
to satisfy Prong 2, to find that Prong 2 is the "centerpiece" of
the statute and is, therefore, not severable. Given the clear
evidence of legislative purpose, we decline to engage in such
retrospective political analysis.
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Legislature could not have intended that" Prongs 1 and 3 survive
without Prong 2. See id. (quoting Mass. Wholesalers of Malt
Beverages, Inc., 609 N.E.2d at 72). This is not a difficult
question. The separated itemization of § 148B(a)'s three factors
easily allows for the straightforward deletion of one factor
without touching the others. Nor do we need to somehow dissect
Prong 2 itself in order to save Prongs 1 and 3. In short, Prong 2
may easily be eliminated from the statute, leaving the remainder
intact. FedEx does not argue to the contrary.
We examine next the "intent of the Legislature,"
Peterson, 825 N.E.2d at 1038, in enacting § 148B(a). The salient
aim of the statute was "to protect employees from being deprived
of the benefits enjoyed by employees through their
misclassification as independent contractors." Somers v.
Converged Access, Inc., 911 N.E.2d 739, 749 (Mass. 2009). So, the
question is: does leaving § 148B(a) in place without Prong 2 as
applied to Plaintiffs leave Plaintiffs with less protection from
misclassification than would Massachusetts law without § 148B(a)
altogether? FedEx makes no claim that such a reduction would occur
if Prongs 1 and 3 are left standing. Nor do Plaintiffs or the
Massachusetts Attorney General make such a claim even though they
would have great incentive to argue for non-severability were a
pruned statute worse than no statute. On such a record, it would
seem that § 148B(a) without Prong 2 still provides as much (or
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more) protection against misclassification than does Massachusetts
law without § 148B(a) altogether. We therefore think 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 with
respect to the transportation of property.
IV.
We next turn to the district court's single-sentence
disposition of Prongs 1 and 3 of the Massachusetts Statute as
preempted. Schwann, 2015 WL 501512, at *2. This holding puzzles
us because, as explained above, FedEx expressly disavowed making
such an argument on summary judgment. Even on appeal, in the face
of Plaintiffs' argument that Prongs 1 and 3 are not preempted,
FedEx does not argue otherwise, instead stating that "[it] did not
seek to invalidate [Prongs 1 and 3] except to the extent they are
non-severable." This litigation has already lasted over four-and-
one-half years. It should be narrowing rather than widening at
this point. We therefore hold FedEx to its decision not to argue
to us that Prongs 1 and 3 are preempted, and for that reason alone
vacate and reverse the district court's ruling that Prongs 1 and
3 are preempted.
V.
Finally, we are left with Plaintiffs' argument that the
district court should have granted summary judgment for them under
Prong 1 or 3 of § 148B(a). Denials of summary judgment are
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customarily not appealable final orders. Rogers v. Fair, 902 F.2d
140, 142 (1st Cir. 1990). Moreover, the analysis required to
determine whether Plaintiffs should have been considered employees
under Prong 1 or 3 has very little overlap with our analyses of
the preemption or severability issues. So, even if we had
appellate jurisdiction to review whether Plaintiffs have shown on
summary judgment that they were employees under Prong 1 or 3, it
would be unwise to do so before the district court does so.
VI.
Consistent with the foregoing, we affirm the district
court's holding that Plaintiffs' proposed application of Prong 2
to the individuals who provide first-and-last mile pickup and
delivery services for FedEx is preempted; we reverse the district
court's holdings that Prong 2 is not severable and that Prongs 1
and 3 are preempted; and we remand for further proceedings
consistent with this opinion. No costs are awarded to either
party.
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