Supreme Court Holds That Cargo Handler Supervisor Is Exempt From Arbitration
On June 6, 2022, the United States Supreme Court held that a ramp supervisor for Southwest Airlines who trained and supervised teams of ramp agents and cargo handlers who physically load and unload cargo on and off airplanes that travel across the country, and who frequently loaded and unloaded cargo alongside the ramp agents, was not required to arbitrate her federal claims for unpaid overtime under an arbitration agreement she signed with Southwest. (Southwest Airlines, Inc. v. Saxon, USSC Docket No. 21-309.) The Court specifically found that the supervisor belonged to a “class of workers engaged in foreign or interstate commerce” to which the “transportation worker exemption” contained in Section 1 of the Federal Arbitration Act (FAA) applied.
Section 1 of the FAA expressly exempts from the Act’s coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The ramp supervisor herself did not travel in interstate commerce or cross state lines in performing her job functions. The Court nevertheless found that “it is plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods.”
The Court specifically reasoned that by referring to “workers” as opposed to “employees,” the exemption focused on the performance of the actual work and that those workers who were “directly involved in transporting goods across state or international borders” were subject to the exemption and are not required to arbitrate their employment-related claims with their employers. To qualify for the exemption, the worker must at least play a “direct and necessary role in the free flow of goods” across borders, and the ramp agents fit that description because cargo loading is part of cross-border commerce. In this respect, the Court justified its decision by the fact that the FAA includes in the definition of “commerce,” agreements relating to “wharfage,” and reasoned that wharfs are also cargo-loading facilities.
In its opinion, the Court rejected arguments from both Southwest and the ramp supervisor that would have either narrowed or broadened the scope of the exemption. The ramp supervisor contended that the “class of workers” who were subject to the FAA exemption should include all airline employees who carry out the “customary work” of the airline, such as shift schedulers and designers of the Southwest website. Southwest, on the other hand, contended that only workers who “physically accompany freight across state or international boundaries” (such as pilots or flight attendants) were covered by the exemption. The airline also argued that a more expansive view of the exemption was inconsistent with the Act’s “pro-arbitration purposes.” The Court swept aside these arguments while adopting a more “middle ground” approach to the issue, focusing on the work the ramp supervisor typically performed, rather than on what Southwest does generally.
Notably, the Court did not address the issue of whether “last leg” delivery drivers, who transport the final segment of out-of-state goods intrastate, are subject to the transportation worker exemption. Several California state court cases, including Nieto v. Fresno Beverage Co., Inc. (2019) 33 Cal.App.5th 274 and Betancourt v. Transportation Brokerage Specialists, Inc. (2021) 62 Cal.App.5th 552, and one Ninth Circuit Court of Appeals decision, Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020), held that the exemption applied to such drivers. But by stating that it need not address the issue in deciding the Southwest Airlines case, the Court left it for another day.
The Court’s decision was unanimous (8-0), with Justice Coney Barrett not taking part in consideration of the case. It resolved a conflict between the First and Seventh Circuit Courts of Appeal, and affirmed a decision by the latter court to deny a motion to compel arbitration of the ramp supervisor’s claims.
The case serves as an important reminder that not all arbitration agreements are enforceable, and that the “transportation worker exemption” can operate to preclude the ability to enforce arbitration agreements entered into by employees who are directly involved in the transportation of interstate goods.
For more information about this case, and/or legal obligations related to arbitration agreements, we encourage contacting the author of this alert, or your regular AALRR counsel.