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SCOTUS Expands FAA Exemption for Transportation Workers
SCOTUS Expands FAA Exemption for Transportation Workers

In June 2022, in S.W. Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), the Supreme Court weighed in on the scope of arbitration agreements in employment contracts for transportation workers. Saxon, a ramp supervisor at Southwest Airlines who worked loading and unloading cargo from aircrafts, brought a putative class action against Southwest for allegedly violating the Fair Labor Standards Act by not providing ramp workers with overtime compensation despite requiring them to work over forty hours a week. Southwest argued that Saxon was bound by the arbitration provision in Saxon’s employment contract that required Saxon to arbitrate any dispute individually rather than file in court. Even though arbitration agreements are usually enforceable unless a court finds them to be unconscionable, Saxon argued that she should not be bound by the agreement because the Federal Arbitration Act (“FAA”) exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.

The Supreme Court unanimously agreed. Writing for the majority, Justice Thomas explained that airline employees who load and unload cargo from planes should fall into the FAA exemption at issue because they necessarily play an intimate role in the free flow of goods traveling between states. However, the Court rejected Saxon’s broader argument that this exemption should apply to all airline workers, including ticketers and website designers. It reasoned that the historical commonality between the categories listed in the FAA exemption at issue was based on job duty, not job industry.

Narrowly, the Court’s opinion only slightly curtails the scope of the FAA by allowing airline cargo loaders from having their day in court for employment disputes. However, further litigation is expected in the aftermath of this opinion by other workers involved to some extent within the transportation industry. It is anyone’s guess how courts will continue to draw the line as to what is and is not interstate commerce in an innovative transportation industry with emerging mega-companies like Amazon, Uber, Lyft, Turo, and more.

More broadly, the Court’s opinion explains that the question of whether an employee falls within the purview of a FAA exemption is both a textual and historical inquiry. Many employers use arbitration provisions in their employment contracts to ensure disputes are resolved in a simpler, faster, and less expensive way than litigating in court.  In addition, a number of employers use such provisions to try to compel individual arbitration rather than class-based claims.  The Court’s opinion in Saxon demonstrates why employers should consult with counsel about how their arbitration provision is written and which types of employees courts may enforce the provision against.

*The author gratefully acknowledges the work and contributions of Jay Harrington, a 2022 Summer Associate at Lathrop GPM, in preparation of this blog post.

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