For the fourth time in seven years, SCOTUS issued a narrow but unanimous opinion reiterating that the transportation worker’s exemption to compelling arbitration under the Federal Arbitration Act’s (FAA) reaches employees who transport goods, even without leaving the state. Section 1 of the FAA states that disputes involving “contracts of employment” of any class of worker “engaged in . . . interstate commerce” are exempt from being compelled to arbitration.
While this may sound like a hit for employers, this ruling does not expand the scope of the exemption but clarifies that the test required to meet the exemption is whether the employee plays a “direct”, “necessary” or “active role in moving goods across borders” as articulated in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022). In Saxon, the Court concluded that an airline worker loading and unloading cargo, who never left the airport, was a directly involved in transportation goods in interstate commerce and exempt under the test from being compelled to arbitration. The High Court declined Flowers Foods’ request to “adopt a bright-line rule that an individual can never qualify for §1’s exemption unless he crosses state lines….”
The Court left a trail of helpful breadcrumbs for employers to further test the limits of the Section 1 exemption which the high court left open for consideration, including whether a non-employment contractual relationships between the parties impacts whether the exemption applies, (citing Fli-Lo Falcon, LLC v. Amazon.com, Inc., 97 F.4th 1190, 1197-98 (9th Cir. 2024); whether the plaintiff ordering, purchasing and taking title to the goods will defeat the exemption (citing Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020) evaluation as to whether the product reached its intending destination and Immediato v. Postmates, Inc., 54 F.4th 67 (1st Cir. 2022) couriers fulfilling take-out orders made within the state who occasionally crossed state lines, were not engaged in interstate commerce and were not exempt.)
SCOTUS pointed out that it was not taking a position on each of these avenues that might defeat the exemption but that they were mentioned by Flowers Foods while Flowers Foods put all of their eggs on the appeal in the “does not cross state lines” basket.
If your company uses arbitration agreements, and you wish to evaluate whether you employ workers who may fall within the transportation worker exemption placing enforceability of your arbitration agreement at risk, please contact the authors of this blog or any other CDF attorney.
