On June 6, 2022, a unanimous United States Supreme Court issued another key decision interpreting the Federal Arbitration Act (“FAA”) that will have a significant impact on certain employers going forward. In Southwest Airlines Co. v Saxon, the Court held that the airline’s cargo ramp supervisors were exempt from the FAA as they were a “class of workers engaged in foreign or interstate commerce.”
The FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from coverage. 9 U.S.C. § 1. The Supreme Court previously held that the phrase “any other class of workers engaged in foreign or interstate commerce” applies only to “transportation workers.” Circuit City Stores v. Adams, 532 U.S. 105, 119 (2001).
Plaintiff Latrice Saxon worked as cargo ramp supervisor and brought a putative collective action against her employer for allegedly unpaid overtime wages. Saxon’s employment contract contained a provision in which she agreed to arbitrate any wage disputes on an individual basis. When the airline sought to compel arbitration of her claim, Saxon contended that the agreement was unenforceable because she was exempt from FAA coverage as a “transportation worker.” Specifically, Saxon alleged that cargo ramp supervisors frequently physically loaded and unloaded cargo on and off airplanes.
In reversing the district court, the U.S. Court of Appeals for the Seventh Circuit held that Saxon’s purported job duties placed her and her fellow cargo ramp supervisors in the class of “transportation workers” exempt from the Act. In a similar case, the U.S. Court of Appeals for the Fifth Circuit reached the opposite conclusion. The Court granted certiorari to resolve this split of authorities. See e.g. Eastus v. ISS Facility Services, Inc., 960 F. 3d 207 (5th Cir. 2020).
Supreme Court Holding
In her briefing and oral argument before the Supreme Court, Saxon advocated for an industry-wide application of the “transportation worker” exemption that would cover all airline employees regardless of their job duties. The Supreme Court rejected this view stating that the key inquiry is to identify “the actual work that the members of the class, as a whole, typically carry out.”
The employer argued for a narrower view that would only apply the exemption to employees who physically accompany the cargo across borders. The Supreme Court rejected this reading of the Act as too narrow. Similarly, the Supreme Court rejected the argument that the FAA’s statutory purpose overrode what it viewed as the “plain text” of the statute exempting cargo loaders.
Ultimately, the Supreme Court held that Saxon fell within the applicable “class of workers” because plaintiff’s alleged job duties regularly involved loading and unloading cargo that would be transported across state lines and the record did not reflect conflicting evidence on this point. The Supreme Court then went on to hold that the act of loading and unloading cargo from planes constitutes interstate commerce because it is essential to actually transporting cargo through interstate commerce. As such, Saxon and other cargo ramp supervisors were exempt from FAA coverage.
The Saxon decision makes clear that the FAA does not exempt “virtually all employees of major transportation providers.” Rather, the application of the “transportation worker” exemption turns on the day-to-day activities of the workers themselves. The Supreme Court indicated that the “transportation worker” exemption would not apply to workers whose job duties are “further removed” from the channels of interstate commerce. As such, the exact contours of the “transportation worker” exemption will be determined by further litigation.
While this decision means that certain arbitration agreements with transportation workers may not be enforceable under the FAA, such agreements might be enforceable under state arbitration statutes. Because this issue is still developing, we will continue monitoring developments in this area and provide updates as new information becomes available.