Arbitration – ‘Contract of employment’ – Misclassification

Listen to this article

Where a plaintiff brought suit alleging that the defendants misclassified him as an independent contractor, a motion by the defendants to compel arbitration based on a distributor agreement should be allowed because the plaintiff has not proffered evidence sufficient for a reasonable factfinder to conclude that he entered into a “contract of employment” with the defendants, so he cannot invoke the transportation worker exemption under §1 of the Federal Arbitration Act.

“Plaintiff Ray Peltier brought this action against Lepage Bakeries Park Street LLC (‘Lepage’), CK Sales Co., LLC (‘CK Sales’), and Flowers Foods, Inc. (‘Flowers Foods’), alleging that the Defendants misclassified him as an independent contractor in violation of Rhode Island and federal law. … In response, the Defendants bring forth this Motion to Compel Arbitration and Stay Proceedings, asserting that Mr. Peltier contractually agreed to submit such claims to binding arbitration under the Federal Arbitration Act (‘FAA’) — or under Rhode Island’s Arbitration Act — and thus requests the Court to compel arbitration of this misclassification dispute. …

“Mr. Peltier does not dispute that he entered a valid arbitration agreement that governs his claims against the Defendants. However, Mr. Peltier asserts that he cannot be compelled to arbitrate because he falls under the category of transportation worker that are exempt from arbitration under §1 of the FAA. …

“As Mr. Peltier underscored, §1 of the FAA exempts ‘contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce’ from the statute’s general mandate to enforce a valid arbitration agreement. 9 U.S.C. §1. The Supreme Court prescribed a narrow construction to §1, stating that it applies only to ‘contracts of employment of transportation workers’ engaged in foreign or interstate commerce. Cir. City Stores, Inc. v. Adams, 532 U.S. 105, 118-19 (2001)). Ultimately, whether there was a ‘contract of employment’ between Mr. Peltier and the Defendants is the dispositive inquiry here. …

“The Defendants claim that §1 does not apply to Mr. Peltier because the Distributor Agreements between CK Sales and [K A Peltier Distributing Inc. (KAP)] was not a ‘contract of employment of … workers’ but a contract between two business entities. … This argument raises a matter of first impression within the First Circuit. … Thus, the Court must look to the out-of-circuit legal landscape on this issue to guide its analysis. …

“The fact that Mr. Peltier — in his individual capacity — signed the Personal Guaranty and filed this suit does distinguish this case from those upon which the Defendants rely. …

“… The relevant inquiry here is whether Mr. Peltier was party to a contract with the Defendants that called for ‘work by workers’ as to constitute a contract of employment. Nothing in the Distributor Agreement or the incorporated Arbitration Agreement instructs that any one individual must personally perform KAP’s obligations. … Accordingly, the Arbitration Agreement does not give rise to a contract of employment between Mr. Peltier and the Defendants.

“In sum, Mr. Peltier has not proffered evidence sufficient for a reasonable factfinder to conclude that he entered into a ‘contract of employment’ with the Defendants. Without evidence of such a contract, Mr. Peltier cannot invoke §1’s transportation worker exemption to avoid his agreement to arbitrate his misclassification and wage claims against the Defendants under the FAA.”

Peltier v. Lepage Bakeries Park Street, LLC, et al. (Lawyers Weekly No. 52-036-25) (15 pages) (McConnell, J.) (C.A. No. 1:24-CV-452) (March 20, 2025).

Click here to read the full text of the opinion.