June 21, 2022

Supreme Court Clarifies Transportation Worker Exception to Federal Arbitration Act

The Supreme Court unanimously held on June 6, 2022 that airline workers who load and unload cargo from airplanes are exempt from the coverage provided under the Federal Arbitration Act (FAA). Employers commonly use the FAA to compel arbitration where disputes arise under employment agreements containing arbitration provisions. However, Section 1 of the FAA exempts “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from the FAA’s coverage. According to the Supreme Court, workers who load and unload cargo onto airplanes fall within that exemption.

The plaintiff, a ramp supervisor with Southwest Airlines, argued that Section 1’s catchall, “other class of workers,” should include all airline employees. In response, Southwest argued that the catchall should be interpreted narrowly to include only those workers who physically transport goods. The Supreme Court found middle ground and held that the “other class of workers engaged in interstate commerce” means those workers “directly involved in transporting goods across state and international borders.” While the Supreme Court did not expressly define what level of direct involvement would satisfy this standard, it held that those who load and unload cargo onto airplanes are one example.

This decision is likely to have significant effects on employers in the transportation and shipping industries particularly amongst their non-union and supervisory workforces. While unionized workforces are typically bound by the grievance and arbitration provisions of their respective collective bargaining agreements, non-unionized and supervisory workers are subject only to the terms of their individual employment agreements. By exempting those directly involved in transporting goods across state and international borders from the FAA, employers may no longer be able to compel arbitration for those employees not subject to a collective bargaining agreement. 

Because supervisors are traditionally excluded from collective bargaining rights under the National Labor Relations Act and the Railroad Labor Act (covering railroad and airline workers), the FAA provided one of the key mechanisms for employers to require the arbitration of supervisor workplace disputes. In light of this decision, for certain classes of supervisors who work in rail, air, sea and ground transportation, that mechanism may no longer be available.  

If you have any questions about the application of the FAA’s Section 1 exemption to your workforce, or any other questions about how this decision may affect your business please contact an attorney on the Faegre Drinker labor and employment team.

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