Airline Cargo Loaders Exempt From Arbitration, U.S. Supreme Court Says

Earlier this week, the U.S. Supreme Court handed down a win for an airline employee seeking to avoid arbitrating her wage dispute, holding that airline cargo loaders are engaged in interstate commerce and thus are exempt from the Federal Arbitration Act (FAA). The decision, in Southwest Airlines Co. v. Saxon, was not nearly as employee-friendly as it could have been, as the Court rejected the argument that virtually all airline workers are engaged in interstate commerce for FAA purposes. Instead, the Court held that courts must consider the actual work performed by transportation workers to determine whether they are exempt from the FAA.

A Heavy Dose of Textualism to Determine Who Is Engaged In Interstate Commerce

In general, the FAA requires that courts enforce agreements to arbitrate just as they would any other contract. But Section 1 of the FAA specifically exempts from its requirements employment contracts with “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”¹ Southwest Airlines, a unanimous decision, dealt with which workers, exactly, are an “other class of workers engaged in foreign or interstate commerce.”²

The case began when Latrice Saxon, a Southwest ramp supervisor — an employee who trained and supervised teams of ramp agents, who in turn load and unload the cargo carried by the airline’s planes — filed a lawsuit based on the airline’s alleged failure to properly pay overtime wages to her and her co-supervisors. Although Saxon had signed an agreement to arbitrate such claims, when Southwest sought to enforce that agreement, Saxon argued that she was exempt from the FAA because ramp supervisors were a “class of workers engaged in foreign or interstate commerce.” The Seventh Circuit ultimately held that ramp supervisors were indeed exempt from the FAA, creating a circuit split with a prior Fifth Circuit decision, and the Supreme Court took the case.³

The Supreme Court, interpreting the statute using a variety of textual tools, determined that ramp supervisors are exempt from the FAA. First, it held that the relevant “class of workers” should be defined based on what the workers actually do because the FAA’s use of the word “workers” “directs the interpreter’s attention to the performance of work.”⁴ Relying on contemporary dictionary definitions of “worker,” the Court held that for purposes of the FAA exemption, the key is what work the workers in question perform, not what their employer does generally.⁵

Next, the Court addressed whether cargo loaders were in fact a “class of workers engaged in foreign or interstate commerce.” (Southwest did not dispute that ramp supervisors frequently load and unload cargo themselves, in addition to supervising others who do so, and the Court expressly reserved the question of whether supervision of cargo loading would be enough by itself to exempt a class of workers from the FAA.⁶) Using a variety of canons of construction and context clues, the Court stated that to qualify for the FAA’s Section 1 exemption, a transportation worker “must be actively engaged in transportation of ... goods across borders via the channels of foreign or interstate commerce” to qualify for the FAA’s Section 1 exemption.⁷ Cargo loaders are indeed so engaged, the Court held, so Saxon and her co-supervisors were exempt from the FAA’s requirement.

A Rejection of Broader and Narrower Readings of Section 1

Southwest Airlines represents a middle-road approach, as the Court rejected Saxon’s broader and Southwest’s narrower approaches to interpreting the FAA’s Section 1 exemption. Saxon argued that the relevant “class of workers” is all employees who do the customary work of an airline.⁸ Southwest, on the other hand, contended that only workers who literally move goods or people across foreign or interstate boundaries — “pilots, ship crews, locomotive engineers, and the like” — are exempt under Section 1. While both sides invoked traditional statutory-interpretation tools (including both arguing that the ejusdem generis canon supported their reading), the Court rejected both, instead adopting the analysis described above.

Although the case represents a win for cargo loaders, therefore, it is not nearly the earth-shaking decision it would have been had the Court adopted Saxon’s extremely broad reading of the Section 1 exemption. Such a decision would have invalidated nearly all arbitration agreements in the transportation industry. In light of this decision, transportation companies may wish to carefully consider the work actually done by specific groups of workers rather than simply requiring all employees to sign arbitration agreements, but they need not scrap arbitration agreements for all employees.