Note: This QuickStudy provides an update to a May 2022 Labor & Employment Workforce Watch article addressing the same topic.
In an 8–0 decision, the Supreme Court held that a ramp agent supervisor that sometimes loads and unloads cargo on and off airplanes was sufficiently engaged in interstate commerce and thus exempt from arbitration proceedings under Section 1 of the Federal Arbitration Act (FAA).
Ms. Saxon is a ramp agent supervisor for Southwest who works at only one airport. Her job entails supervising ramp agents as they load and unload luggage on and off planes. Ms. Saxon claims that she and other ramp agent supervisors often load and unload planes, as well. But when the plane takes off, Ms. Saxon stays on the ground at the airport where she works.
When Southwest hired Ms. Saxon, she signed an arbitration agreement. And when Ms. Saxon sued Southwest, Southwest sought to enforce this arbitration agreement. But Ms. Saxon refused, arguing that she could not be forced to arbitrate her claims because she is a “transportation worker” who is exempt from arbitration pursuant to Section 1 of the FAA. The trial court agreed with Southwest, but the Seventh Circuit reversed that decision and sided with Ms. Saxon.
The FAA and its “Transportation Worker” Exemption
Nearly 100 years ago, Congress passed the FAA to temper judicial hostility towards arbitration agreements. Since then, courts have routinely—though sometimes reluctantly—enforced arbitration agreements in the employer-employee context so long as the employment is linked to interstate commerce. However, Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” While the Supreme Court has since held that Section 1’s exemption only applies to the employment contracts of “transportation workers,” there is an open question as to the types of “transportation workers” who fall under this exemption.
In Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 119, the Supreme Court commented that the “legislative record on the [Section 1] exemption is quite sparse.” In its landmark decision on this statute, the Court was unable to point to language in either committee report addressing the meaning of the provision nor any mention of Section 1’s exclusion during debate on the FAA on the floor of either chamber of the 68th Congress.
Nonetheless, the Circuit City Court explained that Section 1’s exemption is intended to apply narrowly to certain classes of transportation workers—such as seamen and railroad employees—who serve a “necessary role in the free flow of goods.” This is, at least in part, because at the time the FAA became law, the concept of Congressional power over activities affecting interstate commerce had not developed to the extent it has since. Accordingly, the Court has analyzed the exemption and the phrase “workers engaged in foreign or interstate commerce” within the meaning the 68th Congress intended to give the phrase. In 2019, the Supreme Court held in New Prime Inc. v. Oliveira (2019) 139 S.Ct. 532, 537, that the term “worker” encompasses both employees and independent, but did not offer detailed guidance as to the breadth of workers encompassed under Section 1’s exemption where those workers did not cross state lines in rendering services.
As a result, employers and companies utilizing independent contractors in the transportation industry have had to navigate through a gray area, particularly where those companies operate in various circuits across the country.
The Supreme Court Holds that Airplane Cargo Loaders are Transportation Workers Who are Exempt from Arbitration—But Gray Areas Remain for Other Industries
In a unanimous opinion, the Supreme Court provided a narrow ruling: ramp agents and ramp agent supervisors who load and unload cargo onto and off airplanes are transportation workers and thus exempt under Section 1 of the FAA.
Despite the argument by Ms. Saxon that all airline employees should be excluded from arbitration pursuant to Section 1 of the FAA—citing the fact that the air transportation industry operates within the flow of interstate commerce—the Court was unconvinced. It held that the Section 1 transportation worker exemption is determined not by the industry of the employer but by the conduct of the individual employee. Ms. Saxon argued that, because airliners “[a]s an industry” are engaged in interstate commerce, all Southwest employees are within the class of workers covered by Section 1’s exemption. But the Court disagreed with this broad approach. Instead, whether an employee is a transportation worker under Section 1 is determined by what the employee does day-to-day in his or her job, not the general industry of the employer.
The Court then turned to what it means to be “engaged” in interstate commerce. Citing various dictionaries for their definitions of the terms “engaged” and “commerce,” the Court held that “any class of workers directly involved in transporting goods across state or international borders falls within Section 1’s exemption.”
The Court then held that airplane cargo loaders like Ms. Saxon are workers engaged in interstate commerce because “airplane cargo loaders plainly do perform activities within the flow of interstate commerce when they handle goods traveling in interstate and foreign commerce, either to load them for air travel or to unload them when they arrive.” The Court further noted that its decision was limited to the specific facts about Ms. Saxon’s job duties, acknowledging that “the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders.”
Thus, while the Court’s guidance is important for certain roles who provide transportation support, there is still an open question on how broadly the “transportation worker” exemption has been expanded, if at all.
Review Your Arbitration Agreements
While this narrow ruling favored employees performing certain tasks, the Court has frequently ruled in favor of enforcing arbitration agreements. Nonetheless, given the changing landscape in arbitration laws across the country, employers should use this opportunity to review the arbitration agreements they are using, particularly if they have workers who physically load ships, planes, cars, or other vehicles operating in the flow of interstate commerce.
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