1st_Circuit_seal.pngAuthored by Barry Miller

A recent ruling from the First Circuit Court of Appeals captioned Massachusetts Delivery Association v. Coakley has important implications for industry groups representing employers that find themselves embattled in wage and hour litigation regarding widespread industry practices.  In overturning a ruling from the U.S. District Court for the District of Massachusetts, the First Circuit held that an industry group’s challenge to the enforcement of the Massachusetts Independent Contractor Statute must proceed, notwithstanding the fact that several members of the industry group were defendants in litigation regarding the statute in the state courts.

The Massachusetts Delivery Association (“MDA”) is a non-profit trade organization composed of more than 40 members engaged in the business of providing same-day delivery services, many of which retain the services of independent contractors to make deliveries.  Following a wave of litigation challenging the classification of the delivery drivers as independent contractors under Massachusetts law, the MDA filed a lawsuit seeking to enjoin the Massachusetts Attorney General from enforcing the Massachusetts Independent Contractor Statute in the delivery services industry.  The statute mandates that “an individual performing any service . . . shall be considered an employee” unless, among other requirements, the “service is performed outside the usual course of business of the employer.”  See Mass. Gen. Laws ch. 149, § 148B.  The MDA argued that this stringent requirement, not imposed by any other state, would require its members to change their fundamental business models, drive up costs, and adversely affect prices, routes and services.  For these reasons, the MDA argued that any application of the statute to companies in the delivery services industry was subject to the preemption provisions of a particular federal statute and imposed a constitutionally impermissible burden on interstate commerce.

The Attorney General moved to dismiss the MDA’s lawsuit under the Younger abstention doctrine, which prohibits federal courts from enjoining certain state judicial proceedings.  The primary basis of the Attorney General’s argument was the fact that three of the MDA’s members were defendants in state court lawsuits challenging the classification of their delivery drivers as independent contractors.  As a result, the Attorney General argued, the MDA’s challenge to the statute in federal court would improperly interfere with the state court proceedings in which its members were participants.  The District Court granted the Attorney General’s motion and dismissed the case.

On appeal, the First Circuit held that the Younger doctrine did not apply because the MDA was a distinct entity with legal interests that were not identical to any of its three members who were defendants in litigation regarding the independent contractor status of their drivers.  The First Circuit noted that Younger abstention was to be applied sparingly and in “extraordinary circumstances” or “unusual situations.”  On that basis, the appellate court sent the case back to the District of Massachusetts for litigation on the merits of the MDA’s claims.

The merits of the MDA’s challenge to the enforcement of the Massachusetts Independent Contractor statute have momentous implications for employers doing business in the Commonwealth.  As  the First Circuit observed, the Massachusetts statute imposes requirements for independent contractor status that are far stricter than those found in any other state, and the statute also exposes putative employers to harsh penalties and the prospect of onerous civil liability, including treble damages.  The First Circuit’s ruling is important in another respect, as well.  The increasing prevalence of wage and hour litigation has left employers subject to waves of litigation that roil through industries based on asserted violations that arise out of longstanding and deeply ingrained industry practices, such as the use of independent contractors as delivery drivers.  By allowing industry groups to pursue litigation in an attempt to vindicate such an industry practice, as the MDA has attempted to do in its challenge to the Independent Contractor Statute, this ruling permits business owners to band together and take proactive steps to defend their business practices, rather than simply waiting to be sued.