Supreme Court Rules Air Cargo Shippers Exempt From Federal Arbitration Law

June 6, 2022

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Decided on June 6, 2022

Southwest Airlines Co. vs. SaxonNo. 21-309

The Supreme Court today ruled that a ramp agent supervisor whose job frequently requires him to move baggage and other goods on and off planes is a transport worker exempt from the provisions of the law federal government on arbitration requiring the enforcement of arbitration agreements.

Background: The Federal Arbitration Act, or FAA, generally requires courts to enforce arbitration agreements. Section 1 of the FAA exempts from this requirement “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 USC § 1. The Supreme Court has previously held that the residual clause of § 1 covering workers engaged in foreign or interstate commerce applies only to “transportation workers.” Circuit City Stores v. Adams532 US 105, 119 (2001).

Latrice Saxon, a ramp agent supervisor who frequently loads and unloads cargo on and off planes, has agreed to arbitrate pay disputes against Southwest on an individual basis. After Saxon filed a federal class action lawsuit against Southwest for overtime pay, the airline decided to impose arbitration. Saxon objected to arbitration, arguing that she was a “worker[] engaged in foreign or interstate commerce” and was therefore exempt from the FAA. The United States Court of Appeals for the Seventh Circuit agreed, finding that ramp agents and their supervisors are FAA-exempt transportation workers.

Publish: Whether airline ramp agent supervisors are “workers engaged in foreign or interstate commerce” exempt from the provisions of the Federal Arbitration Act requiring the enforcement of arbitration agreements.

Court attire:

A ramp agent supervisor who frequently moves cargo in and out of airplanes plays a direct role in the cross-border transportation of goods and is therefore exempt from federal arbitration law under the residual clause of section 1 .

“We think so. . . clear that airline employees who physically load and unload cargo onto and off aircraft traveling in interstate commerce are, in practice, part of interstate freight transportation.

Judge Thomas, writing for the Court

What this means:

  • In defining the relevant category of workers, the courts must focus on the daily tasks of the workers themselves. The Court rejected Saxon’s argument that what matters is the usual work of businesses in the wider sector in which the employer operates, explaining that § 1 does not exempt “virtually all employees of the principal transport providers”.
  • The Court reiterated that, in determining whether the § 1 exemption applies, the relevant class of workers must be compared to “seamen” and “railroad employees” whom Congress specifically exempted from the FAA in 1925. The closer a class of workers approximates to those groups, the more the workers will be deemed exempt from the FAA under the residual clause of § 1.
  • The Court specifically declined to decide how the FAA exemption for transportation workers applies to other industries and classes of workers whose duties are “farther from the channels of interstate commerce or the actual crossing of borders.” .
  • Employees who may be FAA exempt could still be required to arbitrate their claims under state arbitration laws, many of which require the enforcement of non-exempt arbitration agreements for transportation workers.

The opinion of the Court is available here.

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