The first part of this column reviewed the Supreme Court’s recent decision in Bissonnette v. LePage Bakeries dealing with the transportation worker exclusion under Section 1 of the Federal Arbitration Act as well as issues that continue to generate litigation about its application.
Circuit City Reexamined
What should be done to resolve the continuing dispute over transportation workers under Section 1’s residual clause? One approach would revisit the premises of Circuit City’s analysis, particularly its failure to give greater weight to legislative history in 1925. Another approach would be to amend the FAA to clarify congressional intent regarding Section 1’s residual clause. Both approaches, whether feasible or not at present, are beyond the purpose of this column.
There is another option, however, to resolve Section 1 issues that avoids applying the subjective qualifiers summarized in Saxon. A sounder approach entails a Supreme Court reorientation by turning to well-established U.S. law and practice in the field of employment and labor relations. A reexamination of Circuit City supports this conclusion while leaving the decision in place as precedent.
First, as noted above, Bissonnette’s use of qualifiers—”actively,” “direct and necessary,” “free flow,” “channels” of commerce, and so on—is not drawn from the text of the residual clause. The text of that provision refers simply to “…any other class of workers engaged in…commerce.” Where do the Court’s qualifiers come from?
The principal sources are Circuit City and lower court cases it relied on to determine what Congress understood to be the extent of its regulatory authority under the Commerce Clause in 1925 when the FAA was enacted. In Circuit City, the Court gave a limited reading to “engaged in commerce” in the residual clause, declining to treat the phrase as coterminous with “involving commerce” as used in Section 2 of the FAA for enforcing arbitration agreements. As the Court explained, the reference to “engaged in commerce” was based on previous decisions.
Two cases the Court relied upon for its constrained reading of “engaged in commerce” are personal injury decisions, The Employers’ Liability Cases from 1908 and the Second Employers’ Liability Cases from 1912. Circuit City also cited two later anti-trust cases under the Clayton Act, United States v. American Building Maintenance Industries and Gulf Oil v. Copp Paving Co.
In contrast to narrowly construing “engaged in commerce,” the Circuit City majority confirmed a broader interpretation for the phrase “involved in commerce” in Section 2 of the FAA. For the Court, this phrase stemmed from congressional intent to exercise the commerce power to its outer limit, a reading of the text applied six years before in Allied-Bruce Terminix Companies v. Dobson.
Justice Kennedy reasoned that the use of different modifiers for “commerce” supported reliance on the canon of ejusdem generis. Applying this canon linked Section 1’s use of “any other class of workers” to workers sharing the transportation characteristics of seamen and railroad employees in the preceding portion of the sentence. At the time, seamen and railroad employees had been the principal classes of workers covered by U.S. labor laws, with the Court citing the Shipping Commissioners Act of 1872 and the Transportation Act of 1920.
For Justice David Souter in dissent, legislative history showed that Section 1’s “catchall” phrase was adopted after objections by labor officials and expressed an “abundance of caution” by Congress, or ex abundanti cautela. While the dissent did not prevail, a cautionary approach is still advisable lest the residual clause be so narrowly construed that it swallows the exclusion.
Second, Circuit City’s analysis of Section 1’s residual clause is not limited to the statutory text, but also relied on a forward-looking view that was not tied to pre-FAA decisions and legislation. We realize this from the Court’s answer to the dissent’s objection that the majority was acting in a contradictory fashion. For the dissent, the Court was excluding workers over whom Congress had authority under the Commerce Clause when the FAA was passed in 1925, but including workers for whom Congress’s authority was not yet clear.
In this portion of Circuit City, Justice Kennedy speculated that Congress likely wished to “reserve for itself specific legislation for those engaged in transportation” and “did not wish to unsettle established or developing statutory dispute resolution schemes covering specific workers.” Consistent with this possibility, the majority observed that passage of the Railway Labor Act (RLA) was “imminent,” and that other legislation “was soon to follow,” referring to the 1936 amendment of the RLA to cover air carriers and their employees. Unfortunately, later Section 1 cases—New Prime, Saxon and Bissonnette—have overlooked the relevance of Circuit City’s reference to subsequent legislation.
Third, while the Court in Circuit City fixed the scope of Section 1 as applying only to transportation workers and not to all employees, it did not focus on how to determine the content of the Section 1 exclusion. Even if one accepts Circuit City’s reading of “engaged in commerce” in Section 1 so that it is not coterminous with “involved in commerce” in Section 2, an analysis should not end there.
On the questions of “who” is a transportation worker, and the relationship of a “class of workers” to commerce, limiting the residual clause to those covered by statutes in place prior to or when the FAA was enacted creates continuing uncertainty about how the law applies. This conclusion is consistent with the Court’s recognition in Circuit City that Congress, a coordinate body of the federal government, was destined to legislate in the field.
A Workable Solution
Circuit City recognized congressional authority to enact relevant legislation after passage of the FAA. This column encourages the Court and other judges to follow suit. But how should such an examination proceed? The brief answer is to seek guidance from post-FAA dispute-resolution legislation and administrative action involving transportation workers. Such guidance would not treat transportation workers as frozen in time to 1925 when deciding who is subject to FAA enforcement. Instead, the Court can draw upon existing law to give substantive meaning to Section 1’s residual clause.
This perspective on Section 1 and the Court’s role accepts the outcome in Circuit City that limits the residual clause to transportation workers but seeks to minimize the risk of inconsistencies and inefficiency in law and practice. Doing so would not require reliance on Chevron v. Natural Resources Defense Council and its doctrine of administrative deference, which recently was overruled in Loper Bright Enterprises v. Raimondo. None of the agencies offered as examples in this column have jurisdiction to decide how the FAA should be interpreted, a distinction drawn by the Court in Epic Systems v. Lewis.
Nonetheless, as the Court stated in Skidmore v. Swift & Co., a 1944 decision involving “working time” under the FLSA, “…the rulings, interpretations, and opinions” of the Department of Labor (DOL), the agency overseeing administration of the statue, “while not controlling upon the courts…constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.” The Court in Loper Bright made it clear that Skidmore deference remains a principal method of statutory analysis. Examples will illustrate this approach.
One issue left open on remand in Bissonnette is whether the company’s drivers are transportation workers. We know from the appellate record that the drivers, characterized by the company as franchisees, not only deliver company products, but also provide merchandising service at local stores. Another issue left open in Bissonnette is whether the drivers are engaged in interstate commerce when picking up baked goods at a warehouse in Connecticut for delivery elsewhere in the state. There is no dispute the plaintiffs drive trucks, but do the facts related to either issue weigh against an exclusion under Section 1’s residual clause?
The National Labor Relations Act is an important example of authority that can assist in identifying transportation workers under Section 1. The NLRA provides for jurisdiction in matters “affecting commerce,” with “commerce” defined broadly as “trade, traffic, commerce, transportation, or communication” among, between and within U.S. states, territories, and the District of Columbia. For present purposes, while the NLRA applies to a range of private sector workers, transportation workers are included.
The relevance of the NLRA is evident in its history and is consistent with the forward-looking perspective in Circuit City that Congress preserved the option to develop other dispute resolution systems. In the year prior to passage of the NLRA in 1935, there were massive work stoppages by truck drivers and longshoremen, two types of transportation workers.
Congress’s statutory findings for the NLRA speak directly to the need for industrial peace to maintain the free flow of commerce. When the NLRA was enacted, the reach of the Commerce Clause was still confined under then-existing Supreme Court doctrine, changing in 1937 when the Court confirmed a more expansive view of the Commerce Clause in NLRB v. Jones & Laughlin. Although Congress did not incorporate an arbitration system into the NLRA, the statute is designed to promote collective bargaining to resolve labor disputes, including strikes. Arbitration of individual grievances eventually became an element of the process.
The potential importance of the NLRA is apparent for the workplace in Bissonnette. Drivers for LePage Bakeries, the respondent in Bissonnette, were considered part of an appropriate bargaining unit in proceedings before the National Labor Relations Board (NLRB), the agency responsible for administering the NLRA. Decisions by NLRB hearing officers in 2002 and in 2005 carefully analyzed the work carried out by the drivers, known as route sales associates—including their delivery and merchandising duties, commission pay structure, and hours of work—in determining that they were employees participating in interstate commerce.
Nor would reference to the NLRA automatically result in determinations that every driver provides a transportation service. If, for example, the NLRB finds that truck drivers for a localized small business are insufficiently engaged in interstate commerce, it can conclude that the drivers are not subject to the NLRA because the company falls short of the minimum jurisdictional revenue standards required for statutory coverage.
The Railway Labor Act is another example of a federal law that can guide the resolution of Section 1 disputes. The RLA, legislation in 1926 that succeeded the Transportation Act of 1920 as noted by the Court in Circuit City, is particularly relevant. The RLA’s statutory definition of an “employee” is “every person…who performs any work” for a carrier covered by the act. A decade later, when the RLA was amended, an action also cited in Circuit City, Congress used words that parallel Section 1, defining airline employees as those “engaged in interstate or foreign commerce.” Does “engaged in commerce” mean one thing under Section 1 of the FAA, but something entirely different under the RLA?
The RLA is important in determining the content of transportation work not only because the Court relied on it in deciding Circuit City, but because a variety of workers are subject to the RLA and therefore presumptively engaged in interstate commerce. The ramp agents in Saxon who do not cross state borders are but one example. For railroads, Section 153(h) of the RLA includes coverage of yard-service personnel, machinists, coach cleaners, shop laborers, store employees, and others in support roles. For airlines, in addition to flight personnel, several positions are subject to the RLA although not crossing state lines, including engineers, mechanics, passenger service staff, dispatchers and instructors, among others. In Saxon, the Court could have relied on the RLA for guidance, as it had Circuit City, but it did not, without explanation.
Another relevant statute is the FLSA, enacted in 1938, and a basis for the plaintiffs’ claims in Bissonnette. The FLSA defines “commerce” as “trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof,” with the act applying to any enterprise that “has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person.” In light of the explicit statutory references to “transportation” and use of the phrase “engaged in commerce,” as in the FAA, guidance from FLSA practice would make sense in FAA disputes involving the Section 1 residual clause.
Of particular significance in Section 1 cases is the status of workers characterized as independent contractors, as in Bissonnette and New Prime. For decades, the DOL has applied an economic reality test to determine whether a worker is an independent contractor or an employee, paying particular attention to whether the worker is dependent on an employer or is self-employed in business.
In carrying out its duties, the DOL maintains an Occupational Outlook Handbook to assist agency oversight and enforcement of employment laws within its purview, including the FLSA. The Handbook provides a comprehensive guide to the American workplace that clarifies who is considered part of a class of transportation workers, identifying delivery truck and sales drivers, among others. The DOL also offers an extensive summary of transportation occupations that includes drivers and others on vehicles and vessels as well as a host of related jobs dealing with equipment maintenance and repairs, support services, and storage of goods.
The RLA, NLRA, and FLSA are important labor and employment laws providing substantive guideposts for the U.S. economy, but their applicability in determining the Section 1 exclusion was not discussed in New Prime, Saxon or Bissonnette. A reorientation of the Court’s application of Section 1 will facilitate the resolution of disputes over the transportation worker exclusion.
Conclusion
The Supreme Court has directed courts to determine a “class of workers” excluded under Section 1 of the FAA by focusing on the actual work performed by workers and whether they are engaged in commerce. Courts have struggled to define work that is subject to the exclusion, often by referring to a series of vague and subjective qualifiers. An alternative approach is for courts to refer to longstanding labor and employment laws, and the findings of related agencies, that, by statutory mandate, have decades of experience resolving disputes affecting transportation workers engaged in interstate commerce. By decision-making that is faithful to the Court’s reading of the residual clause in Circuit City, but respectful of established law and practice, courts need not serve as personnel officials undertaking time-consuming litigation to resolve who is covered by Section 1’s residual clause. In the end, this approach promotes consistency between the procedural goals of the FAA and substantive legal doctrines governing the American workplace.