United States Supreme Court Issues Another Decision on Enforcement of Arbitration Clauses
The United States Supreme Court recently issued a decision significant to the enforcement of arbitration clauses in employment contracts. This decision comes after another decision earlier this term on the enforcement of arbitration clauses. In Southwest Airlines Co. v. Saxon, the Court unanimously held that a ramp supervisor for Southwest Airlines is a member of a “class of workers engaged in foreign or interstate commerce” and is therefore exempt from the Federal Arbitration Act.
Latrice Saxon is employed by Southwest Airlines as a ramp supervisor. In this role, she oversees and trains ramp agents who load and unload cargo from airplanes that travel across the nation, but she also frequently steps in to help load and unload cargo. Saxon filed a class action suit against Southwest under the Fair Labor Standards Act for failing to pay overtime to her and other ramp supervisors. However, Saxon’s employment contract purportedly required her to arbitrate any wage disputes individually. Relying on this clause, Southwest filed a motion to dismiss the class action. Saxon responded that ramp supervisors were exempt from the Federal Arbitration Act (FAA) under Section 1 of the statute. Section 1 of the FAA carves out “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
In addressing whether the exemption applied to Saxon, the Court first defined the “class of workers” to which Saxon belongs. The Court explained that a “class of workers” refers to what an individual employee does for a company, not what the company does generally. The Court found Saxon was in a class of workers based on the day-to-day work she did supervising and loading and unloading cargo, not based on the work that Southwest does generally. In defining a class of workers, the Court left open the question of whether supervising the loading and unloading of cargo alone was sufficient to exempt a class of workers under Section 1.
After addressing the class of workers to which Saxon belonged, the Court held that such a class of workers was engaged in interstate commerce and therefore exempt from the FAA. More than twenty years earlier, in Circuit City Stores, Inc. v. Adams, the Court explained that transportation workers who play a “direct and necessary role in the free flow of goods” across state borders were exempt under Section 1 of the FAA. The Court elaborated on this premise in Southwest Airlines, explaining that someone who is “doing the work of unloading or loading cargo from a vehicle carrying goods in interstate commerce” is exempt under Section 1. Importantly, the Court rejected Saxon’s argument that all Southwest employees were exempt from the FAA.
What does Southwest Airlines Co. v. Saxon mean for businesses? This decision could have a significant impact on businesses, especially transportation businesses. While workers such as pilots and ship crews are already exempt from the FAA, Saxon suggests that employees who are engaged in work like loading and unloading semi-trailers that cross state or national lines may also be exempt from the FAA. This could make individual arbitration agreements contained in employment contracts unenforceable for some businesses. If you have questions about the enforceability of the arbitration clause in your employment agreement, feel free to reach out to your BrownWinick attorney. For more information on another Supreme Court case addressing arbitration clauses, see BrownWinick’s blog on Morgan v. Sundance.
Special thanks to BrownWinick summer clerk Avery Malinski for her assistance in the creation of this blog.