Supreme Court of the United States Issues Important Decision on the Federal Arbitration Act

On June 6, 2022, the Supreme Court of the United States dominated that airline cargo loaders are exempt from the Federal Arbitration Act (FAA) below the statute’s “transportation worker” exemption. In Southwest Airlines Co. v. Saxon, the Court reasoned, in a unanimous 8-0 resolution, that whereas not all staff of an airline are exempt from the FAA, ramp staff who load and unload cargo from planes are half of a “class of workers engaged in foreign or interstate commerce” particularly exempted by the act. By rejecting some of the arguments superior by each the plaintiff and the defendant, the Court’s holding is a “mixed bag” for employers.

Latrice Saxon, a ramp supervisor for the airline who incessantly hundreds and unloads baggage, airmail, and industrial cargo on and off airplanes that journey throughout the nation, had introduced a putative class motion alleging wage and hour violations below the Fair Labor Standards Act of 1928. The airline sought to implement an arbitration settlement with Saxon that required individualized arbitration for wage disputes pursuant to the FAA. The excessive court docket sided with Saxon, ruling her particular job duties place her in a “class of workers” engaged in international or interstate commerce who’re exempted from the FAA.

However, in reaching the conclusion, the Court rejected Saxon’s industry-wide view that all airline staff fall into the exemption for “foreign or interstate commerce” just like “seamen” and “railroad workers.” The Court said that Saxon couldn’t make such a generalization as a result of it will broaden the statutory textual content. Instead, the Court centered on the Saxon’s particular job duties, reasoning that staff like Saxon, who bodily load and unload cargo off planes touring in interstate commerce, “are as a practical matter, part of the interstate transportation of goods.”

The Court additionally rejected the airline’s arguments that the exemption applies solely to staff who bodily transport items or individuals internationally (i.e., pilots, ship crews, and prepare engineers) and that loading cargo is just not a detailed sufficient connection to interstate commerce to fall below the exemption. The Court additional rejected the rivalry that the FAA’s “proarbitration purposes” ought to weigh in opposition to increasing the exemptions.

Key Takeaways

The Court sided with the worker to find that her employer couldn’t implement an arbitration settlement below the FAA to cease her from bringing wage and hour claims in court docket, breaking with the Court’s tendency lately to favor arbitration. However, in doing so, the excessive court docket rejected the rivalry that each one airline staff are exempt from the FAA and as a substitute used a fact-specific take a look at centered on precise job duties. Employers could wish to think about the enforceability of arbitration agreements below the FAA with particular units of staff by evaluating the precise job duties and connection to interstate commerce. Employers additionally could wish to think about updating their arbitration agreements to supply for the utility of a state arbitration regulation ought to the FAA not apply, as an settlement that isn’t enforceable below the FAA could nonetheless be enforceable below state regulation.

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