Clear Skies or Stormy Weather? The FAA’s Transportation Worker Exception After Southwest Airlines v. SaxonPart One of a Two-Part Series

Posted in: Employment Law

Editor’s Note: This article is divided into two parts. In the first part, the Supreme Court’s recent decision in Southwest Airlines v. Saxon is reviewed and summarized. In the second part, appearing tomorrow, problems posed by the decision will be considered.

1. Introduction

Looking out an airplane window at the gate, a passenger will see the ground crew moving luggage on and off the plane. Those employees, also called ramp agents, often are subject to arbitration under a collective bargaining agreement (CBA) negotiated by a union. But what if there is no CBA, and if, instead, there is an employer-developed arbitration plan covering disputes over pay, workplace discrimination, or other statutory rights, to be resolved through individual proceedings under the Federal Arbitration Act?

In Southwest Airlines v. Saxon, the Supreme Court held that ramp agents cannot be compelled to arbitrate under the FAA. The Court’s decision applied the residual clause of Section 1 of the FAA, which provides a statutory exception for “seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.” Justice Clarence Thomas, writing for a unanimous Court, affirmed an appellate ruling applying the FAA exemption. Justice Amy Coney Barrett did not participate, as she had been on the appellate panel for the case prior to her confirmation to the high Court.

The Court’s decision is only the third it has issued addressing the FAA’s transportation worker exemption. The first was Circuit City Stores, Inc. v. Adams, decided in 2001, concluding that the residual clause in Section 1 covers only transportation workers and not workers generally. The second decision, New Prime, Inc. v. Oliveira, applied the exception to an interstate truck driver classified as an independent contractor and not an employee.

Although Southwest Airlines resolves the narrow issue of the exempt status of ramp agents under Section 1, other issues are, quite literally, up in the air. This article will highlight five issues left unanswered that promise litigation for years to come. Questions remain about the governing standard, the impact on the Railway Labor Act, the status of supervisors, exemptions for gig economy personnel, and disputes subject to state law in arbitration or judicial proceedings.

2. The Facts and Procedural History

Latrice Saxon, a ramp agent supervisor, sued Southwest alleging overtime violations under the Fair Labor Standards Act. Ms. Saxon regularly loaded and unloaded luggage and other cargo on Southwest planes. Unlike non-supervisory ramp agents, Ms. Saxon was not covered by the CBA negotiated by the Transport Workers Union for those employees. However, under the CBA, ramp agent supervisors are permitted, within limits, to assist and support rank-and-file ramp agents on the job.

Southwest responded to the lawsuit by moving to compel arbitration, citing Ms. Saxon’s agreement to the employer’s ADR Program. The ADR Program requires arbitration for a range of statutory violations, including wage and hour claims alleged by employees who are not subject to a CBA. Ms. Saxon opposed the company’s motion, arguing that she was a transportation worker exempt from FAA enforcement under Section 1 of the statute. The District Court ruled that the FAA applied, requiring arbitration because Ms. Saxon was not involved in actual transportation.

On review, the Seventh Circuit reversed the District Court, reasoning that, “The act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood at the time of the Arbitration Act’s enactment in 1925.” Southwest successfully petitioned for certiorari, urging the Supreme Court to resolve a split in circuit court views represented by Eastus v. ISS Facility Services, Inc. In that case, the Fifth Circuit decided that a customer service agent at a ticket counter was not a transportation worker exempt from the FAA. Southwest’s petition to the Court urged that the FAA exemption should apply only when an individual physically crosses a border.

3. The Supreme Court Decision

The question presented to the Court was narrowly framed:

Whether the Federal Arbitration Act’s “transportation worker” exemption – for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. §1 – covers supervisors of airplane baggage loaders even though neither the supervisors nor the baggage loaders actually transport anything, much less in foreign or interstate commerce.

In rejecting the company’s border-crossing test, Justice Thomas followed a two-part analysis. First, he wrote that Ms. Saxon and other ramp agents who load and unload planes are a class of workers covered by the Section 1 exemption. The opinion offered as precedent the decision in Baltimore & Ohio Southwestern R. Co. v. Burtch. In that case, federal law for interstate railroad operations was controlling for an individual injured when unloading a delivery. For the Court, the proper analysis in determining a “class of workers” focuses on an employee’s duties, and not the employer’s business enterprise.

Turning to the second step in the analysis, Justice Thomas wrote that Ms. Saxon and ramp agents are engaged in interstate commerce. In particular, the decision drew upon dictionary definitions of “engaged” as meaning occupied, employed, or involved, and “commerce” as concerning the transit of goods. Support for the “engaged in” conclusion came from a reference elsewhere in Section 1 to an FAA exemption for maritime transactions, and, specifically, to “agreements relating to wharfage” in commerce, which includes loading and unloading cargo.

Following from the above, the residual clause in Section 1 has a common attribute with seamen and railroad employees; that is, participation in the flow of commerce. Applying this interpretation of the FAA, the Court rejected Southwest’s position that the exemption applies only when an employee physically crosses a border.

Justice Thomas’s opinion also considered several arguments offered by the parties. Ms. Saxon contended that employees carrying out the customary work of the airline industry should be an exempt class, but the Court instead focused on the actual work performed by ramp agents. For the Court, Ms. Saxon’s approach was too broad as it “potentially includes everyone from cargo loaders to shift schedulers to those who design Southwest’s website.”

Justice Thomas also rejected Southwest’s argument relying on antitrust cases that found intrastate businesses involving asphalt sales and janitorial services were not engaged in interstate commerce. The Court reasoned that the activities in those cases were, “far more removed…than physically loading cargo directly on and off an airplane headed out of state.” The Court found unpersuasive Southwest’s reliance on the general pro-arbitration policy of the Court in earlier cases since the plain text in Section 1 was sufficient to answer the question presented. The Court observed, as in New Prime, that it is not “free to pave over bumpy statutory texts in the name of more expeditiously advancing a policy goal.”

Part II, to be published tomorrow, will consider problems posed by the Court’s decision.

Barry Winograd, an arbitrator and mediator, is a past president of the National Academy of Arbitrators, and also has served on the adjunct law school faculty at the University of California, Berkeley, and the University of Michigan. The author was counsel of record for an amici filing by the Academy and the National Association of Railroad Referees in Southwest Airlines v. Saxon.

Posted in: Employment Law

Tags: Arbitration, SCOTUS

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