People employed as ramp workers who frequently handle cargo for an airline are “transportation workers” exempt from federal arbitration law (FAA), the US Supreme Court has ruled. Southwest Airlines Co. vs. Saxon, n° 21-309 (June 6, 2022). Therefore, employees are not required to arbitrate their wage hour claims under the FAA, but may still be subject to arbitration under state law.
The FAA’s transportation worker exception excludes from FAA coverage “contracts of employment of mariners, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 USC § 1. In recent years, the scope of the exception – particularly its catch-all “any other class of workers” provision – has become a significant issue in class action litigation. In that case, the narrow question the Supreme Court asked to resolve a circuit division was “[w]Workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport those goods themselves, are interstate “transportation workers” exempt from federal arbitration law.
In the decision below, the United States Court of Appeals for the Seventh Circuit argued that, even if the employee was not personally transporting goods or people in interstate commerce, she was an essential link in the interstate commerce chain and, therefore, exempt from the FAA. The United States Court of Appeals for the Fifth Circuit came to the opposite conclusion in Eastus vs. ISS Facility Servs., Inc..a 2020 case involving similar facts.
Latrice Saxon, a loading ramp supervisor for Southwest Airlines at Chicago’s Midway Airport, has filed a class action lawsuit against her employer. Despite her supervisory role, she alleged that she frequently performed the work of physically loading and unloading cargo onto and off the planes (which Southwest disputed). She filed a putative class action lawsuit under the Fair Labor Standards Act alleging that she and her fellow track supervisors were entitled to overtime pay. When the airline sought to compel arbitration of its claims under the parties’ arbitration agreement, Saxon argued that it could not be forced to arbitrate because it is a ‘transportation worker’ exempt from FAA coverage and therefore the arbitration agreement was not enforceable.
The district court found that the transport worker exception did not apply and ordered arbitration. The Seventh Circuit backtracked, concluding that the transportation worker exception applied.
The reasoning of the Court
The Supreme Court, in a unanimous 8-0 opinion written by Justice Clarence Thomas, upheld the judgment of the Court of Appeal. (Judge Amy Coney Barrett was recused from that case and did not participate.)
First, the Court held that, in deciding whether a “class of worker” is engaged in interstate commerce for the purposes of the transportation worker exception, the analysis focuses on the functions of the workers in question and not on the company or industry in which the workers are engaged. The judges rejected an industry-wide or company-wide approach advocated by the plaintiffs, which would broadly exempt “virtually all employees of major transportation providers.” Instead, the court said the key investigation is the “actual work that the members of the group, as a whole, generally do.”
Second, the Court considered what it means to “engage in foreign or interstate commerce”. He held that workers must be “directly involved in the transport of goods across state or international borders falls within the exception of §1”. The Court determined that air cargo loaders are engaged in foreign or interstate commerce because “one who loads cargo onto an aircraft destined for interstate transit is intimately involved in commerce (for example., transport) of this cargo. The court rejected the airline’s argument that the exception only applied to employees who physically move goods across states on an airplane or other vehicle.
The Supreme Court decision makes it clear that when it comes to determining whether workers qualify except for FAA transportation workers, what employer (or the procuring entity) has no bearing on the analysis. Rather, the analysis focuses on the specific functions these workers perform and whether these functions directly involve interstate commerce.
In this case, the apron supervisor who claimed to load and unload freight frequently qualified for the exception. The Court, however, said that airline employees whose duties are further removed from the interstate transit flow (such as an airline’s shift planners and web designers) would likely not be eligible. except. In a footnote, the Court also suggested that last mile delivery drivers and food delivery drivers are “further away” from interstate commerce channels and the answer would not be so clear cut in such a case. .
Similarly, the Court clarified that its opinion did not apply to employees who only carry out the supervision of transport workers and who are not themselves directly involved in the transport of goods; he reserved that question for another day. Therefore, the contours of the transport worker exception will continue to be contentious.
Yet the opinion suggests that many workers in the transportation industry and workers in other industries who generally engage in interstate commerce are unlikely to be able to invoke the exception to escape arbitration under of the FAA if their role is simply tangential to the interstate flow of goods.
Notwithstanding the court ruling, while the transport worker exception may mean that an arbitration agreement is not enforceable under the FAA, an arbitration agreement with transport workers may nevertheless be enforceable. under applicable state law.