The United States Supreme Court ruled on Monday that airline baggage handlers cannot be compelled to arbitrate employment disputes under the Federal Arbitration Act (FAA). Although the ruling is narrow in scope, employees may seize on it in an attempt to avoid mandatory arbitration provisions in the transportation industry, including gig economy workers.
Summary of the Supreme Court’s Decision
In Southwest Airlines Co. v. Saxon, No. 21-309 (June 6, 2022), a Southwest Airlines ramp supervisor, Latrice Saxon (Saxon), filed a putative class action in federal court alleging that the airline failed to pay proper overtime wages to her and other ramp supervisors. The airline sought to enforce its arbitration agreement with Saxon and moved to dismiss the complaint under the FAA. In response, Saxon invoked § 1 of the FAA, which exempts from the statute’s ambit “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Saxon argued that ramp supervisors were an exempt “class of workers engaged in foreign or interstate commerce.” The District Court disagreed, holding that only those involved in actual transportation, and not the mere handling of goods, fell within the exemption. The Seventh Circuit Court of Appeals reversed. It concluded that the act of loading cargo onto a vehicle to be transported interstate is itself commerce. Since it was undisputed that ramp supervisors load and unload cargo, they fell within the exemption. The Seventh Circuit’s decision conflicted with an earlier Fifth Circuit decision.
The Supreme Court, in a unanimous opinion written by Justice Thomas, affirmed the Seventh Circuit’s decision. It held that since Saxon “frequently loads and unloads cargo on and off airplanes that travel in interstate commerce,” she “belongs to a ‘class of workers engaged in foreign or interstate commerce’” to which the arbitration exemption in § 1 of the FAA applies. Consequently, Saxon was not required to comply with her arbitration agreement and could instead pursue her claim in federal court. In reaching this conclusion, the Court rejected the interpretations both Saxon and the airline offered. Saxon argued that the exemption covered all employees of major transportation providers; the airline argued that the exemption covered only workers who physically move goods or people across boundaries (e.g., pilots). The Supreme Court instead explained that any worker involved in transporting goods across state or international borders falls within the exemption.
Although the Court confirmed that the FAA's arbitration exemption does not apply to all airline workers, it left open difficult questions regarding which class of airline workers are included, as well as questions about what other industries might be subject to § 1’s exemption. It’s clear, however, that the exemption is unlikely to apply to workers who are not facilitating the transportation of goods across state lines or crossing those lines themselves. Furthermore, the decision does not appear to strike a retreat from the Court’s commitment to enforcing mandatory arbitration provisions in employment agreements as a general matter. And employers can still compel workers to arbitrate their claims under most state arbitration laws.