Synopsis of Seyfarth: As noted above, employers have generally prevailed when the United States Supreme Court has taken 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 saying those who load cargo onto planes traveling interstate are exempt from federal arbitration law (FAA). However, the Court’s factual ruling rejects any clear-line test based on the employer’s industry and allows for a worker-based investigation. As such, it leaves room for employers to seek to enforce their arbitration agreements under federal law and opens the door to future litigation over whether workers are actually “engaged in commerce.” interstate” when they do not cross borders to carry out their work.
Background
Latrice Saxon worked at Chicago’s Midway International Airport as a runway supervisor for Southwest Airlines. She sued the company in federal court, alleging that Southwest Airlines failed to pay overtime to Saxon and others. Saxon, however, had previously agreed to submit any wage disputes to an arbitrator who would decide them in arbitration on an individual basis. As a result, the company decided to dismiss the lawsuit and force arbitration under the FAA.
Saxon resisted the motion to compel, arguing that her work placed her outside the scope of the FAA. Specifically, she cited Section 1 of the FAA, which provides that the law does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign trade or interstate”.
The district court sided with Southwest Airlines, finding that ramp agents and supervisors are responsible for handling cargo but not responsible for transporting that cargo across state lines. The Seventh Circuit reversed that decision, finding that “[t]The act of loading cargo onto a vehicle to be transported interstate is itself commerce,” as the term was understood when the FAA was enacted. The Seventh Circuit ruling put it in conflict with an earlier Fifth Circuit decision, and the Supreme Court took the case to resolve the split.
What did the Supreme Court hold?
In a unanimous 8-0 decision (Judge Barrett recused), the Supreme Court agreed with the Seventh Circuit’s ruling that ramp agents and supervisors who physically loaded cargo onto planes traveling across airport lines State are subject to the FAA Transportation Worker Exemption. Southwest Airlines Co. vs. Saxon596 United States ___ (2022).
The Court reached its conclusion through a two-step analysis. (Slip. Op. at 3.) First, the Court defined “the relevant ‘class of workers’ to which Saxon belongs.”
Identifier. Then, the Court “determines[d] whether this class of worker is “engaged in foreign or interstate commerce”. Identifier.
Definition of the relevant category of workers as “air cargo loaders”
Saxon urged the Court to take a broad view of this issue and decide it based on the industry of his employer – airlines. The Court expressly rejected this sweeping approach, noting that the FAA refers to “workers,” not “employees” or “servants,” suggesting that the scope of the exemption depends on the performance of the work.
The Court ruled that this investigation is not about the nature of the employer’s business, but about the actual work that the members of the group usually do. (Identifier. to 4.) In other words, “Saxon is … a member of a ‘working class’ based on what he does in Southwest, not what Southwest does in general.”
The Court found from the record before it that Saxon and other ramp supervisors physically loaded and unloaded goods into and out of aircraft on a frequent basis.
Define whether “aircraft cargo shippers” are engaged in interstate commerce
The Court then considered whether the class of aircraft cargo loaders to which Saxon belonged were “engaged in foreign or interstate commerce” and found its answer in a decision handed down nearly a century ago:
We said it is “too obvious to require discussion that the loading or unloading of interstate shipment by the employees of a carrier is so closely related to interstate transportation that it is practically a part of it.”
Baltimore and Ohio Southwestern R. Co. vs. Burtch, 263 U.S. 540, 544 (1924). We believe it is equally clear that airline employees who physically load and unload cargo onto and off aircraft traveling in interstate commerce are, in practice, part of interstate freight transportation. They form “a class of workers engaged in foreign or interstate commerce”.
(Identifier. at 5.) Applying that decision here, the Court held that “one who loads cargo onto an aircraft bound for interstate transit is intimately involved in the commerce (eg, transportation) of that cargo.” (Identifier. to 6.)
Having found that “Saxon frequently loads and unloads cargo onto and off aircraft that travel in the course of interstate commerce”, the Court held that it satisfied the transport worker exemption provided for in Section 1 of the FAA.
The decision does not interfere with compulsory arbitration of certain types of disputes arising from collective agreements under the Railway Labor Act.
What about other categories of workers?
Although the Court acknowledged that “aircraft cargo shippers” engage in interstate commerce, it acknowledged that the distinction may not always be clear:
We recognize that the answer [whether the class of workers are
engaged in foreign or interstate commerce] will not always be so clear when the working class performs functions further away from the channels of interstate commerce or the actual crossing of borders.
(Identifier. at 5 n.2.) Although the Court did not offer a clear test to help draw such distinctions in the future, it did provide some pointers.
First, the Court noted that, although the FAA does not define “transportation worker”, any such worker must at least be “actively engaged” in the “free movement of goods across borders” via the ” channels of foreign or interstate commerce”. (Identifier. to 6.)
In applying these criteria, the Court noted that freight loaders exhibit these essential characteristics of a transport worker because they “load[] cargo on board an aircraft destined for interstate transit” and, when engaged in such activity, “it
[can] there is no doubt that [interstate] transportation [is] still in progress.”Identifier.)
Second, the Court gave some examples of work that would not qualify for the exemption. Citing Gulf Oil Corp. vs. Copp Paving Co., 419 U.S. 186 (1974), he noted that workers who sell asphalt within states are not engaged in interstate commerce simply because the product is then used to build interstate highways. States. Likewise, citing United States v American Building Maintenance Industries422 US 271 (1975), the Court explained that workers who provide localized janitorial services to a corporation engaged in interstate commerce do not satisfy the exemption because they are not carrying on business “in the framework” of interstate commerce.
In a footnote, the Court acknowledged that two Circuits have recently issued conflicting rulings regarding workers who performed duties “further removed from the channels of interstate commerce or the actual crossing of borders.” (Slip Op. at 5 n.2.) He referenced the Ninth Circuit’s decision finding that “last leg” delivery drivers fell under the Section 1 exemption and the Seventh Circuit’s decision finding that food delivery drivers did not fall within the Section 1 exemption. address these issues to resolve this case”.
Identifier.
Implications for employers
Employers have avoided the worst-case scenario some feared – a decision that the transport worker exemption applies to all employees who work for employers engaged in the transport industry. Instead, the Court issued a fact-based decision focusing on the application of the transport worker exemption to a worker directly engaged in the loading of goods for cross-border transport.
Companies should anticipate that other workers who are less directly involved in the flow of interstate commerce will attempt to invoke the exemption by claiming that they too are exempt from the FAA. The burden of demonstrating that the “transportation worker” exemption applies is on the worker, and the decision in Saxon provides employers with ammunition to reduce these arguments based on the work “actually performed” as well as the link between this work and the flow of goods across borders.
Ironically enough, the Supreme Court’s decision reinforces the importance of state law in enforcing workers’ arbitration agreements most related to interstate transportation. For these workers, choice of state law will take on renewed importance, as many states have already passed uniform arbitration laws that do not contain exemptions for transportation workers and others have a trail. clear to legislate on the applicability of these agreements.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
