Following its recent ruling regarding California’s ban on Private Attorneys General Act representative waivers in employment arbitration agreements, on June 6, 2022, the Supreme Court issued Southwest Airlines Co. v. Saxon. The justices unanimously sided with the airline employee (with Justice Amy Coney Barrett taking no part in consideration or decision of the case) and rejected Southwest’s bid to compel the claims to arbitration.
Saxon, a ramp supervisor for Southwest Airlines, brought a putative class action under the Fair Labor Standards Act (FLSA) for overtime wages. Relying on the Federal Arbitration Act (FAA), Southwest moved to compel arbitration pursuant to a provision in the employment agreement signed by Saxon.
Saxon invoked Section 1 of the FAA, which exempts from the statute “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Southwest argued that to qualify for that exemption, employees must physically be part of the transportation (like seamen or railroad employees).
A district court sided with Southwest, but the Seventh U.S. Circuit Court of Appeals reversed, creating a circuit split with the Fifth Circuit.
In an opinion authored by Justice Clarence Thomas, the Court affirmed the Seventh Circuit and allowed the class action to proceed based on a finding that ramp supervisors constitute a “class of workers engaged in foreign or interstate commerce” and are therefore exempt from the FAA. The justices kept the decision narrow, rebuffing Saxon’s industrywide approach to cover all airline workers.
“We have said that it is ‘too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it,’” he wrote. “We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods.”
In limiting its ruling, the Court avoided holding—as employers feared they might—that the FAA’s transportation worker exemption applies to all employees in the transportation industry. The Court also laid the burden on the workers to demonstrate that they qualify for the exemption.
Why it matters: Though the Supreme Court granted only a narrow win to transportation workers, similar suits regarding the scope of the FAA’s transportation worker exemption are likely to follow.