The U.S. Supreme Court Rejects Industry-Based Reading Of FAA's Transportation Worker Exemption, Reduces Visibility For Workers Challenging Arbitration Agreements

• Published date: 10 June 2022
• Subject Matter: Litigation, Mediation & Arbitration, Transport, Aviation, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Law Firm: Seyfarth Shaw LLP
• Author: Ms Jennifer Riley, Andrew L Scroggins and Tyler Zmick

Seyfarth Synopsis: As we previously reported, employers generally have found success when the U.S. Supreme Court takes up questions about the arbitrability of workplace disputes. The unanimous decision in Southwest Airlines Co. v. Saxon bucks that trend, denying employers a clear victory and holding that those who load cargo onto airplanes engaged in interstate travel are exempt from the Federal Arbitration Act (FAA). The Court's fact-specific decision, however, rejects any bright-line test based on the employer's industry and allows for a worker-based inquiry. As such, it leaves room for employers looking to enforce their arbitration agreements under federal law and opens the door to future litigation regarding whether workers are actually "engaged in interstate commerce" when they do not cross borders to perform their work.

Background

Latrice Saxon worked at Midway International Airport in Chicago as a ramp supervisor for Southwest Airlines. She filed suit against the company in federal court, alleging that Southwest Airlines failed to pay overtime wages to Saxon and others. Saxon, however, previously had agreed to submit any disputes over wages to an arbitrator who would decide them in arbitration on an individual basis. Accordingly, the company moved to dismiss the lawsuit and to compel arbitration under the FAA.

Saxon resisted the motion to compel, arguing that her work placed her outside the scope of the FAA. More specifically, she cited Section 1 of the FAA, which provides that the statute does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

The district court sided with Southwest Airlines, reasoning that ramp agents and supervisors are responsible for the handling of goods but not responsible for the transportation of those goods across state lines. The Seventh Circuit reversed that decision, holding that "[t]he act of loading...