MEMORANDUM AND ORDER
I. Introduction
Plaintiff Massachusetts Delivery Association (“MDA”) has filed this lawsuit against Defendant Maura Healey,
II. Standard of Review
The Court grants summary judgment where there is no genuine dispute as to any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a). “A fact is material if it carries with it the potential to affect the outcome of the suit under applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp.,
This factual summary recounts the undisputed material facts. MDA is a trade organization representing entities engaged in the business of same-day delivery service. D. 73 ¶ 1 (MDA’s statement of undisputed material facts); D. 175 at 1 (Defendant’s response to plaintiffs statement of undisputed material facts). Most MDA members hire independent contractors to provide delivery services. Id. One such MDA member, offered by MDA as an exemplar for the purpose of this suit, is X Pressman Trucking & Courier, Inc, (“Xpressman”). D. 73 ¶2; D. 175 at 2. Xpressman provides both “scheduled route” and “on-demand” delivery services through independent contractors who utilize their own cars or trucks. D. 73 ¶¶ 3-4; D. 175 at 2. Scheduled route service requires package pick-up and delivery at scheduled times and locations. D. 73 ¶ 5; D. 175 at 2. Xpressman has approximately 100 scheduled routes operated by 46 couriers. D. 73 ¶ 6; D. 175 at 3. On-demand service, on the other hand, is variable. D. 73 ¶ 7; D. 175 at 3. Xpressman fields requests from its clients for unscheduled, rush deliveries. Id. Couriers who provide on-demand service contact Xpressman each day to indicate their availability. D. 73 ¶8; D. 175 at 3. Xpressman then matches its clients’ requests with the couriers’ stated availability. Id. Xpressman contracts with twelve on-demand couriers, but only seven make twenty on-demand deliveries on an average day. D. 73 ¶ 9; D. 175 at 3. -
As of October 2012, Xpressman employed six full-time and two part-time employees who performed administrative and warehouse duties. D. 73 ¶ 10; D. 175 at-4. They were paid a salary or hourly wage and received health insurance and 401(k) plan benefits (including a four percent contribution match by Xpressman). D. 73 IT 11; D. 175 at 4. For these employees, Xpressman also provided workers’ compensation insurance, paid payroll taxes and contributed to unemployment insurance. Id. By contrast, Xpressman’s independent contractor couriers are paid by route and do not receive benefits such as health insurance or 401(k) benefits. D. 73 ¶ 13; D. 175 at 5. Xpressman also does not provide workers’ compensation, pay payroll taxes or contribute to unemployment insurance for its independent contractors. Id.
IY. Procedural History
MDA instituted this action on September 7, 2010. D. 1. The Court allowed the Attorney General’s motion to dismiss' on the basis of abstention pursuant to Younger v. Harris,
MDA now renews its motion for summary judgment, D. 156, and the Attorney General renews her cross-motion for summary judgment, D.174. The Court heard the parties on the pending motions and
V. Discussion
A. The Statutes at Issue and Prior Cases
The FAAAA expressly preempts certain state laws pertaining to motor carriers, stating that “a State ... may not enact or enforce a law ... related to a price, route, or service of any motor carrier ... with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The First Circuit determined that Section 148B “clearly concerns a motor carrier’s ‘transportation of property.’ ” MDA II,
Section 148B provides a three-pronged' test to determine whether “an individual performing any service” is an independent contractor. ‘ The individual must be-“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;” the Service must be “performed outside the usual course of business of the employer;” and “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.” Mass. Gen. L. c. 149, § 148B(a). At issue here is the second of these requirements, the so-called “B prong,” because couriers hired to provide delivery services are without exception performing within the usual course of business of the delivery companies.
“The Supreme Court- has instructed that the ‘related to’ language ... is meant to be construed broadly, consistent with Congress’s intention that ... preemption should have an expansive reach.” Tobin v. Fed. Express Corp.,
The First Circuit- instructs this Court to “engage with the real and logical effects of the state statute” in its determination of whether Section 148B “has a forbidden significant effect on even one motor carrier.” Id. at 20, 21. Even the “ ‘potential’ impact on carriers’ prices, routes, and services can be sufficient if it is significant, rather than tenuous, remote or peripheral.” Id. at 21. “[EJmpirical evidence is [not] necessary to warrant FAAAA preemption” if the “logical effect that a particular scheme has on the delivery of services or setting of rates” is “sufficient even if indirect.” Id. “[W]e are following Congress’s directive to immunize motor carriers from state regulations that threaten to unravel Congress’s purposeful deregulation in this area.” Id.
The goal of the FAAAA is to “creat[e] an environment in which ‘[service options will be dictated by the marketplace,’ and not by state regulatory regimes.” N.H. Motor Trans. Ass’n v. Rowe,
B. Section 148B is Preempted by the FAAA
The First Circuit has held that empirical evidence is not required to demonstrate FAAAA preemption, MDA II,
1. Effect on Xpressman’s routes
Several changes resulting from the application of Section 148B would require Xpressman to modify the delivery routes it serves, i.e., if Xpressman’s independent contractors were now classified as employees. One example provided by MDA is that, while independent contractors use their own vehicles, industry standard calls for .employees to drive company-owned cars. D. 158 at 8; D. 73 ¶¶ 20-21; D. 175 at 7 (not disputing industry standard but asserting that employees may use their own cars if they are reimbursed for vehicle operating costs). The use of deliveiy vehicles owned by Xpressman,' instead of being owned by its independent contractors, has the potential - to require Xpressman to change its routes. Even as the Attorney General posits that “[i]t is viable” for employees to use company-owned vehicles for
Further, Section 148B’s effect on routes is implicated by the meal break provision of Chapter 149. A thirty-minute, unpaid meal break must be offered to any person required to work more than six hours per day. Mass. Gen. L. c. 149, § 100. Xpress-man contends that its routes requiring more than six consecutive hours of driving would have to be modified. D. 158 at 3, 20; D. 73 ¶ 46; D. 175 at 16 (responding that many, but not all, routes do not require more than six hours of driving or have a thirty minute break built into the route). The Attorney General’s argument that it would not be difficult for Xpress-man to find drivers willing to forego the meal break is unavailing. D. 174 at 22. A delivery company cannot be forced to conduct its business in reliance upon finding workers willing to waive their statutorily provided entitlements. Similarly, the Attorney General’s remedy for the Sunday work statute, which imposes sanctions on an employer who requires an employee to work on Sunday unless the employee is afforded a day off during the ensuing six days, Mass. Gen. L. c. 149, § 47, is for Xpressman to find drivers who wish to work on Sundays and waive their right to their days off. D. 174 at 24. This solution cannot form the basis of a lasting business model. If compliance with Section 148B hinders the opportunity to provide daily delivery service without the contingency of adding drivers to a route or constricts a route to fewer than six hours of driving, now or in the future, then Section 148B impermissibly affects a delivery company’s routes in a significant way.
2. Effect on Xpressman’s services
The First Circuit instructs that a service “represents a bargained-for or anticipated provision of labor from one party to another, thus leading to a concern with the contractual arrangement between the [carrier] and the user of the service.” To-bin,
“[W]hen a state law directly substitutes the state’s own policies for competitive market forces, the state law produces precisely the effect the preemption clause seeks to avoid: ‘a patchwork of state service-determining laws, rules and regulations.’” Tobin,
Furthermore, to avoid increased costs, delivery companies would logically need to assign multiple delivery routes (those requiring only a couple of hours to complete, for instance) to one employee. See D. 174 at 32; D. 73-1 ¶ 20 (noting that some of Xpressman’s routes take as little as two hours to complete and that eight couriers have routes that take fewer than four hours). Such a modification, however, affects the service offered by the delivery companies to clients. The routes of clients that require that their deliveries be completed early in the day could not be combined with routes of other clients who also require morning deliveries. If delivery companies are forced to adjust the timing of each route, then, as in Tobin, the effect is not tenuous, remote or peripheral. And, even if such balancing of route timing could be achieved with Xpressman’s present client base, constant rebalancing would be required for Xpressman to remain responsive to its existing and new clients’ needs because “the demands of the market could change at any time.” Tobin,
3. Effect on Xpressman’s prices
The potential logical, if indirect, effect of Section 148B is to increase Xpressman’s prices by increasing its costs. There are myriad additional costs incurred by a de
Application of Section 148B also implicates the obligations imposed by Chapter 151. Mass. Gen. L. c. 149, § 148B(a) & (d). .Chapter 151. obligates, employers to ensure that, no matter how employees are paid, they receive at least the minimum wage. Mass. Gen. L. c. 15Í, § 1. Here, Xpressman pays its couriers by the route. D. 73 ¶ 13. Although Xpressman would not be required to compensate its employees by the hour, it would have to incur the expense of tracking each employee’s hours to- ensure compliance with the minimum wage law. - Mass. ' Gen. L. c. 151, § 15. Moreover, Chapter 151 requires that employees receive time-and-a-half for any hours worked beyond a forty-hour work week. Mass. Gen. L. c. 151, § 1A. Any routes requiring more than forty weekly hours to complete, now or in the future, would require multiple employees to avoid the additional labor expense when only one independent contractor is required at present to service the route. See D. 85-2 ¶ 3 (noting that couriers fnay drive more than 40 hours per week to make deliveries). The implication is that the' price charged for the route would increase due to the overtime pay Xpressman would owe to the courier dedicated to the route requiring in excess of forty hours per week to complete. Alternatively, to avoid incurring overtimé costs, the route itself would have to be altered to accommodate the assignment of multiple couriers.
The Attorney General maintains that Section 148B does not mandate the application of other employment laws, namely Chapter 62B, the state income tax withholding laws, and Chapter 152, the workers’ compensation laws, because each provides its own definition of “employee.”
Chapter 62B would require Xpressman to withhold income tax on- behalf of its employees, Mass. Gen. L. c. 62B, § 2, while Chapter . 152 calls for employers to provide workers’ compensation benefits, Mass. Gen, L. c. 152, § 25A. Without deciding ■ whether Chapters 62B • and 152 would be applicable to Xpressman’s couriers should they be classified as employees under Section 148B, the Court observes that each statute imposes potential additional costs on an employer which are likely to be passed on to the consumer in the form of increased prices.
The Attorney General also insists that Section 148B does not trigger application of any federal statutes. D. 174 at 13. Again, the Attorney General improperly limits her analysis of the statutes triggered by Section 148B to only the' explicit and narrow language of the statute. Although no federal statute is specifically named in Section 148B, the practical and significant, if indirect, effect of an employee classification under the law is to require adherence to a host of other laws. For example, under the Patient Protection and Affordable Care Act (the “ACA”), some employers aré required to offer health insurance to eligible employees who work thirty or more hours each week. See 26 U.S.C. § 4980H, In addition, while federal law does not require employers to provide retirement plans pursuant to 26
MDA has submitted evidence quantifying the extent of the increase in costs Xpressman would incur if its independent contractors had to be converted to employees. D. 73-2; D. 73-3; D. 158 at 9; D. 180. The Attorney General responds that MDA “greatly exaggerates” and “double-counts” these costs, D. 174 at 32, creating an issue of material fact that precludes summary judgment. Id. at 32-37. Specifically, the Attorney General contends that Xpressman overstates the number of couriers it would need to hire to service its business and their wage rate, id. at 32-33; the costs of employee benefits and other employee-related expenses, such as workers’ compensation, social security and Medicare, id. at 33-34, 35-37; and the costs of recruiting and hiring its workforce, id. at 34-35. Even crediting the Attorney General’s objections to Xpress-man’s calculations, the Attorney General does not argue that there would be no increase in Xpressman’s costs. To the contrary, the Attorney General concedes that there would be a cost increase, just that it would be less than the increase asserted by MDA, and thus not significant enough to warrant a finding of preemption. D. 174 at 31, 34. Using the Attorney General’s own assumptions, however, the cost increase that would face Xpressman should its couriers be deemed employees is, at a minimum, more than negligible, and logically would translate into higher prices charged to Xpressman’s customers. D. 180 at 3. Such an effect is more that tenuous, remote or peripheral.
Moreover, much of the Attorney General’s dispute about the effect on routes, services and prices focuses on the necessary impact of Section 148B, based on the statutory text, rather than on the potential or indirect impact of classification as an independent contractor. See, e.g., D. 175 at response 17 (provision of fringe benefits and mileage compensation not imposed by Section 148B); response 19 (Section 148B requires paying minimum wage, not industry standard wage rate); response 22 (stem miles not required by Section 148B); response 30 (health insurance costs not imposed by Section 148B); response 33 (401(k) benefits not required by Section 148B). Even where implicated industry standards or statutes would result in changes to routes, services or prices, the Attorney General argues that Xpressman can simply make other choices in how it operates its business. See, e.g., id. at response 20 (employers may require employees to use their own cars so long as employees are compensated for the mileage driven); response 21 (employers may permit employees to use company owned cars for personal transportation); response 46 (law allows for employees to waive statutory meal break). MDA II, however, instructs that the “related to” test is “purposefully expansive.”
Applying First Circuit and Supreme Court precedent, the Court concludes that the logical, if indirect, effect of the application of Section 148B to delivery companies such as Xpressman results in modification of prices (due to higher costs), routes and services. The Court notes, however, that not all First Circuit precedent points clearly in the direction of preemption. The First Circuit in DiFiore implied that a state law regulating a company as an employer or the employment relationship between a company and its workers is not preempted. In determining that Massachusetts’s tips law, as applied to the fee charged by airlines for curbside baggage check by skycaps, was preempted by the Airline Deregulation. Act, the Court observed that the statute “does more than simply regulate the employment relationship between the sky caps and the airline. .. ,”
DiFiore, however, also counseled that a statute that has a direct - connection to prices and services “can fairly be said to regulate both.”
In summary, Section 148B logically has a significant effect on Xpressman’s prices, routes and services and, therefore, Prong B of Section 148B is preempted by the FAAAA. Such preemption is as a matter
C. The extent of preemption
A court should “not nullify more of a legislature’s work than is necessary.” Ayotte v. Planned Parenthood of N. New England,
VI. Conclusion
For the foregoing reasons, the Court ALLOWS MDA’s motion for summary judgment, D. 156, and DENIES the Attorney General’s cross-motion for summary judgment, D 82,174.
So Ordered.
Notes
. MDA originally filed this lawsuit against Martha Coakley in her official capacity at the time as the Attorney General of the Commonwealth of Massachusetts.
. In MDA II, the First Circuit noted the parties’ dispute regarding the extent of the state statutes implicated by Section 148B.
. The Supreme Judicial Court’s recent decision in Sebago v. Boston Cab Dispatch, Inc.,
. The relevant part of the Airline Deregulation Act’s preemption provision is identical to the preemption provision in the FAAAA and thus the case law considering the former aids in the interpretation of the latter. Dan’s City,
. Although the amended complaint sought both declaratory and injunctive relief, the Court understands from counsel’s representation at oral argument that MDA was now seeking only declaratory relief, 3/4/15 transcript at 48, 62, and that is the extent of the relief granted in this Memorandum and Order.