On April 12, 2024, the Supreme Court of the United States issued its decision in Bissonnette v. LePage Bakeries Park St., LLC, No. 23-51, 144 S. Ct. 905, 601 U.S. ___ (April 12, 2024), holding that a worker need not actually be employed in the transportation industry to fall within the Federal Arbitration Act (FAA) section 1 exemption for transportation workers.
Plaintiffs Neal Bissonnette and Tyler Wojnarowski worked as distributors for Flowers Foods, Inc., which produces and markets baked goods. In their franchisee and distribution contracts, the plaintiffs agreed to resolve their disputes, if any, by arbitration. These agreements required “any claim, dispute, and/or controversy” to be arbitrated under the FAA, 9 U.S.C. section 1. But when a dispute did arise, the plaintiffs sought to recover for the alleged labor law violations against Flowers in court rather than by arbitration. However, Flowers moved to compel arbitration under the FAA pursuant to the provisions in their arbitration agreements.
The FAA, provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. section 2. As a result, arbitration agreements are enforced against parties to the agreements unless they fall into an exempt class. One such exemption in the FAA provides: “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. section 1.
The Connecticut District Court and, on appeal, the Second Circuit, with limited explanation for their decisions, both held that the plaintiffs did not fall into this transportation exception. The district court reasoned, and the Second Circuit did not dispute, that both plaintiffs had far more responsibilities than merely driving trucks to deliver the baked goods. As such, the courts found that they were not transportation workers within the meaning of the FAA.
The United States Supreme Court granted certiorari to ensure that the circuits were analyzing consistently with the Court’s recent decision in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022) (ramp supervisor who loaded and unloaded cargo on and off airplanes that traveled in interstate commerce was exempt). Additionally, a circuit split was forming on this issue, as the First Circuit had held the opposite only a year ago in Canales v. CK Sales Co., 67 F.4th 38 (1st Cir. 2023).
The Court’s analysis was limited to was whether a transportation worker must work for a company in the transportation industry in order to be exempt under section 1 of the FAA. The Court reversed the lower courts and noted that the FAA exemption has long been limited to transportation workers since the Court’s 2001 decision in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). This was vital to the Court’s 2024 holding in Bissonnette because the Court’s 2001 decision had held that the phrase, “class of workers engaged in…commerce” is “controlled and defined by reference to” the specific categories of “seamen” and “railroad employees” that precede it. Circuit City, 532 U.S. at 115. Therefore, the proper analysis of the class required the Court to consider what linked “seamen” to “railroad employees.” The Court determined that the groups are linked because they are both transportation workers. Id. at 118-119, 121. The Supreme Court noted:
Unlike those industry-specific statutes, § 1 refers to “seamen” and “railroad employees” without specifying any industry to which they must belong. It would be strange to read the conspicuous absence of similar industry-specific language in § 1 as a sign that Congress defined the exemption on an industrywide basis. The far more natural inference, which we embraced in Circuit City and Saxon, is that “seamen” and “railroad employees” share the employment characteristic of being transportation workers.
Bissonnette, No. 23-51, slip op. at 8, 601 U.S. at ___.
Therefore, the Court determined that a transportation worker need not work for a company in the transportation industry in order to be exempt under section 1 of the FAA. The opinion refuted Flowers’ contention that policy dictates another result. The Court wrote that it would be problematic and expensive for individual courts to determine whether an employer was in the transportation industry, based on the test proffered by the Second Circuit. The Court wrote:
The application of such a test, however, would often turn on arcane riddles about the nature of a company's services. Does a pizza delivery company derive its revenue mainly from pizza or delivery? Do companies like Amazon and Walmart – which both sell products of their own and transport products sold by third parties – derive their revenue mainly from retail or shipping?
Bissonnette, No. 23-51, slip op. at 7, 601 U.S. at ___.
The FAA was crafted to avoid litigation, the Court feared that the Second Circuit’s holding in Bissonnette would result in “mini-trials” on the issue of whether or not a company is in the transportation industry. The Court stated that it has not broadened the scope of the exemption beyond what it had held in Southwest Airlines Co. v Saxon. An exempt worker “must at least play a direct and ‘necessary role in the free flow of goods’ across borders.” 596 U.S. at 458 (quoting Circuit City, 532 U.S. at 121).
This requirement is detached from the overall industry of the employer’s company. An employer in the transportation industry may be more likely to have contracts with employees who play direct and necessary roles in the free flow of goods, but other employers surely will have employees who do as well. Consequently, employers with large interstate operations or transportation components may be less likely to be able to enforce arbitration agreements, even if their primary business is unrelated to transportation.
The question arises if this will open the door for more efforts to claim that a worker is exempt to arbitration. For instance, ride-sharing services largely have been able to enforce arbitration agreements in their contracts with drivers. Often, their arguments have hinged on the fact that most ride-share apps involve intrastate transportation. See generally Cunningham v. Lyft, Inc., No. 20-1567 (1st Cir. Nov. 5, 2021).
But, there is hope for ride-share companies yet. The Bissonnette court noted 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, any exempt worker ‘must at least play a direct and ‘necessary role in the free flow of goods’ across borders.’” Bissonnette, No. 23-51, slip op. at 9, 601 U.S. at ___ (citation and quotation omitted). The Bissonnette court itself did not decide if the bakery delivery drivers were transportation workers or if the company was engaged in interstate commerce. The only finding was that the company need not be a transportation company.
With due respect to the Court, it seems there will be more litigation brought to determine:
- whether a company is involved in interstate commerce and
- whether the worker is a transportation worker.
One concern is that any company with workers involved in the transporting of goods across state lines should be prepared to see the arbitration clauses in their employment agreements attacked.
Client Alert 2024-093
