By Elizabeth Roff
In a recent unanimous decision, the U.S. Supreme Court in Southwest Airlines Co. v. Saxon, 142 S.Ct. 1783_(2022), held that the Federal Arbitration Act (“FAA”) does not apply to workers who load or unload cargo onto airplanes that are part of interstate commerce. These workers thus have the right to choose arbitration or litigate in court.
The employee in Saxon was a ramp supervisor for Southwest Airlines. Her job primarily required her to supervise ramp agents, who load and unload cargo from planes. The employee brought a putative class action claim against Southwest Airlines for alleged unpaid overtime in violation of the Fair Labor Standard Act of 1938 (FLSA). As part of her employment contract, the employee had agreed to resolve such disputes via binding arbitration. The employee, nonetheless, started a lawsuit in federal court. Southwest requested the court compel the employee to resolve their disputes in binding arbitration pursuant to the FAA.
The FAA requires contract disputes involving interstate commerce to be resolve through binding arbitration, subject to a few exceptions. The relevant exception to application of the FAA is “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. Interstate commerce is the general term for transacting or transportation of products, services, or money across state borders. The employee in Saxon argued, and the U.S. Supreme Court ultimately agreed, that the exception applied.
At oral argument, Southwest Airlines argued that the exception was meant to apply only to employees who worked on board the airplane and not cargo loaders. In contrast, the employee wanted all airline workers to be exempt, not just those loading and unloading. The U.S. Supreme Court disagreed with Southwest Airlines and the employee. In determining whether an employee fell within a “class of workers,” the U.S. Supreme Court held that the actual work being carried out by the employee matters—not the industry the employer participates in.
Southwest Airlines did not dispute that the employee’s job duties as a ramp supervisor required frequent loading and unloading of cargo onto planes participating in interstate commerce. As this was not disputed, the U.S. Supreme Court held that ramp supervisors were a “class of workers” engaged in interstate commerce and exempt from the FAA. Because the FAA did not apply, the employer could not require binding arbitration despite the employment contract.
On its face, Saxon appears to be a win for employees. This win, however, is small. Saxon evidences the U.S. Supreme Court’s intent to continue to apply the FAA to employment and labor contracts. The U.S. Supreme Court could have overruled its prior decision that the FAA applies to employment contracts, a position urged by labor rights groups. The FAA continues to apply to employment contracts. When determining whether the FAA’s exception for “class of workers engaged in foreign or interstate commerce” turns on the actual job duties of the worker, and not the nature of the employer’s industry.