Editor’s note: This article is divided into two parts. In the first part, the recent decision of the Supreme Court in Southwest Airlines vs. Saxon is reviewed and summarized. In the second part, which will appear tomorrow, the problems posed by the decision will be examined.
Looking out the aircraft window at the door, a passenger will see the ground crew moving baggage in and out of the aircraft. These employees, also called ramp agents, are often subject to arbitration under a union-negotiated collective bargaining agreement (CBA). But what if there is no CLA, and instead there is an arbitration plan developed by the employer covering disputes over wages, workplace discrimination or other statutory rights, to be resolved through individual proceedings under the Federal Arbitration Law?
In Southwest Airlines vs. SaxonThe Supreme Court tenuous that ramp agents cannot be compelled to arbitrate under the FAA. The court’s decision applied the residual clause of FAA Section 1, which provides a statutory exception for “seafarers, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Judge Clarence Thomas, writing for a unanimous court, upheld an appeal ruling applying the FAA exemption. Judge Amy Coney Barrett did not participate, as she had served on the appeal panel for the case before it was confirmed at the High Court.
The court’s decision is only the third it has issued regarding the exemption of transportation workers from the FAA. The first was Circuit City Stores, Inc. vs. Adams, decided in 2001, concluding that the residual clause of Article 1 covers only transport workers and not workers in general. The second decision New Prime, Inc. vs. Oliveiraapplied the exception to an interstate trucker classified as an independent contractor and not an employee.
Although South West Airlines resolves the narrow question of the exemption status of ramp agents under Article 1, other questions are, literally, hanging in the balance. This article will highlight five unanswered questions that promise litigation for years to come. Questions remain about the current standard, the impact on the Railway Labor Actthe status of supervisors, exemptions for gig economy personnel, and disputes subject to state law in arbitrations or court proceedings.
2. Facts and Procedural History
Latrice Saxon, a ramp agent supervisor, sued Southwest alleging overtime violations under the Fair Labor Standards Act. Mrs. Saxon regularly loaded and unloaded baggage and other cargo onto Southwest planes. Unlike non-supervisory ramp agents, Ms. Saxon was not covered by the CTC negotiated by the Transport Workers Union for these employees. However, under the ABCramp agent supervisors are permitwithin limits, to assist and support base ramp agents at work.
Southwest responded to the lawsuit by seeking compulsory arbitration, citing Ms. Saxon’s agreement to the employer’s ADR program. The ADR program requires arbitration for a range of statutory violations, including wage and hour claims alleged by employees who are not subject to a collective bargaining agreement. Ms. Saxon opposed the company’s petition, arguing that she was a transportation worker exempt from FAA enforcement under Section 1 of the act. The District Court ruled which the FAA applied, requiring arbitration because Ms. Saxon was not involved in the actual transport.
In Review, The Seventh Circuit overturned the district court, holding that “the act of loading cargo onto a vehicle for transport from one state to another is itself commerce, as that term was understood at the time of the enactment of the Arbitration Act in 1925.” Southwest successfully sought certiorari, urging the Supreme Court to resolve a split in circuit court opinions represented by Eastus vs. ISS Facility Services, Inc. In that case, the Fifth Circuit ruled that a customer service agent at a counter was not an FAA-exempt transportation worker. Southwest’s motion to the court urged that the FAA exemption apply only when an individual physically crosses a border.
3. The Supreme Court Decision
The question presented at the Court was closely framed:
If the “transportation worker” exemption from the Federal Arbitration Act—for “sailors, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 USC §1— covers supervisors of airline baggage loaders even though neither the supervisors nor the baggage loaders actually transport anything, let alone in foreign or interstate commerce.
In rejecting the corporate boundary crossing test, Judge Thomas followed a two-part analysis. First, he wrote that Mrs. Saxon and other ramp agents who load and unload planes are a working class covered by the exemption in section 1. The advice offered as a precedent to the decision in Baltimore and Ohio Southwestern R. Co. vs. Burtch. In this case, the Federal Interstate Railroad Operations Act controlled a person injured while unloading a delivery. For the Court, the proper analysis to determine a “class of worker” focuses on an employee’s duties, not the employer’s business enterprise.
Moving on to the second stage of the analysis, Judge Thomas wrote that Ms. Saxon and the ramp agents are engaged in interstate commerce. In particular, the ruling relied on dictionary definitions of “engaged” as meaning occupied, employed or involved, and “commerce” as relating to the transit of goods. Support for the “engaged in” conclusion came from a reference elsewhere in Section 1 to an FAA exemption for maritime transactions, and, more specifically, to “dockage agreements” in commerce, which includes loading and unloading of cargo.
As a result of the foregoing, the residual clause of article 1 has a characteristic common to seafarers and railwaymen; that is, participation in the commercial flow. Applying this interpretation of the FAA, the Court rejected Southwest’s position that the exemption only applies when an employee physically crosses a border.
Judge Thomas’ opinion also took into account several arguments presented by the parties. Ms Saxon argued that employees performing the usual work of the airline industry should be an exempted category, but the Court instead focused on the actual work performed by ramp agents. For the Court, Ms Saxon’s approach was too broad because it “potentially includes everyone from cargo shippers to shift planners to those who design Southwest’s website”.
Judge Thomas also rejected Southwest’s argument based on antitrust cases that intrastate businesses involving asphalt sales and janitorial services were not engaged in interstate commerce. The Court found that the activities in these cases were “much more remote…than the physical loading of goods directly into and out of an aircraft bound for the State.” The Court concluded that Southwest’s reliance on the Court’s general pro-arbitration policy in prior cases was unconvincing, as the clear text of Section 1 was sufficient to answer the question posed. The Court observed, as in New Premiumthat he is not “free to cover up bumpy pieces of legislation in the name of the faster advancement of a political objective”.
The second part, which will be published tomorrow, will examine the problems posed by the Court’s decision.
Barry Winograd, arbitrator and mediator, is a past president of the National Academy of Arbitrators and also served on the adjunct law school at the University of California at Berkeley and the University of Michigan. The author was the case attorney for a friend file by the Academy and the National Association of Railroad Referees in Southwest Airlines vs. Saxon.