Supreme Court Finds FAA ‘Transportation Worker’ Exemption Does Not Require Employment In Transportation Industry – Employment Litigation/ Tribunals

In a unanimous 9-0 decision issued April 12, 2024, the U.S.
Supreme Court held the “transportation worker”
exemption under Section 1 of the Federal Arbitration Act (FAA) does
not require the employee to be in the transportation industry.

In Bissonnette et al. v. LePage Bakeries Park St., LLC
et al., petitioners Neal Bissonnette and Tyler Wojnarowski
owned the rights to distribute products in certain areas of
Connecticut. Their contract contained a mandatory arbitration
provision under the FAA, 9 U.S.C. § 1 et
seq.

Petitioners sued for violations of state and federal wage laws,
arguing they were misclassified as independent contractors and
improperly denied overtime and paycheck protections, and
respondents moved to compel arbitration. Petitioners then responded
arguing an exemption from arbitration under the FAA because the FAA
contains an exception for “contracts for employment of
seamen, railroad employees, or any other class of workers engaged
in foreign or interstate commerce.” The district court
dismissed the case in favor of arbitration and the Second Circuit
affirmed, holding Section 1 of the FAA was only available to
workers in the transportation industry and petitioners were in the
bakery industry. The Second Circuit granted panel rehearing in
light of the Supreme Court’s 2022 decision
in Southwest Airlines Co. v.Saxon, in which
the Court determined that a ramp supervisor who “frequently
load[ed] and unload[ed] cargo” from airplanes belonged to a
“class of workers engaged in foreign or interstate
commerce.” The Second Circuit adhered to its prior decision
after rehearing. The Supreme Court then granted certiorari because
of a circuit court split on this question.

The question before the Supreme Court was “whether a
transportation worker must work for a company in the transportation
industry to be exempt under 1 of the FAA.” The Court
concluded no such requirement exists. Chief Justice John Roberts
delivered the opinion of the Court, stating, “[a]
transportation worker need not work in the transportation industry
to be exempt from coverage under 1 of the FAA.” Discussing
its previous ruling in Southwest Airlines Co., the
Court reinforced that it declined to “adopt an industrywide
approach to §1,” noting that the
“transportation-industry requirement” fashioned by the
Second Circuit “‘pegs its charges chiefly to the
movement of goods or passengers’ and its ‘predominant
source of commercial revenue is generated by that movement.’
But that test would often turn on arcane riddles about the nature
of a company’s services. For example, does a pizza delivery
company derive its revenue mainly from pizza or delivery? Extensive
discovery might be necessary before deciding a motion to compel
arbitration, adding expense and delay to every FAA case. That
‘complexity and uncertainty’ would ‘breed[]
litigation from a statute that seeks to avoid it.’”
(internal citations omitted). The focus of this analysis should
remain on the “performance of the work rather than the
industry of the employer.”

The Supreme Court again reiterated its holding
in Saxon that “a transportation worker is
one who is ‘actively’ ‘engaged in
transportation’ of…goods across borders via the
channels of foreign or interstate commerce.’ In other words,
an exempt worker ‘must at least play a direct and
‘necessary role in the free flow of goods’ across
borders.’ These requirements reinforce the narrow nature of
the exemption and ‘undermine[] any attempt to give the
provision a sweeping, open-ended construction,’ instead
limiting §1 to its appropriately ‘narrow’
scope.” (internal citations omitted). Based on this analysis,
the Court vacated the Second Circuit’s judgment compelling
arbitration and remanded the case for further proceedings.

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