News & Insights

United States Supreme Court Rules Certain Airline Employees Exempt From Federal Arbitration Act

On June 6, 2022, the United States Supreme Court issued a decision that certain airline employees are exempt from the Federal Arbitration Act (“FAA”), as they are considered to be a “class of workers engaged in foreign or interstate commerce”.  See Southwest Airlines Co. v. Saxon, No. 21-309 (June 6, 2022). The FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from coverage. 9 U.S.C. § 1. The Supreme Court previously held that the phrase “any other class of workers engaged in foreign or interstate commerce” applies only to “transportation workers.” Circuit City Stores v. Adams, 532 U.S. 105, 119 (2001).

The Plaintiff in Saxon worked as cargo ramp supervisor and brought a putative collective action against her employer for unpaid overtime wages. Saxon’s employment contract contained a provision in which she agreed to arbitrate any wage dispute. The airline sought to enforce its arbitration agreement, and Saxon contended that the agreement was unenforceable because she was exempt from FAA coverage as a “transportation worker.” Saxon argued that cargo ramp supervisors frequently loaded and unloaded cargo on and off airplanes.

The District Court disagreed, holding that only those involved in actual transportation fell within the exemption. In reversing the district court, the U.S. Court of Appeals for the Seventh Circuit held that Saxon’s job duties placed her and her fellow cargo ramp supervisors in the class of “transportation workers” exempt from the Act. However, in a similar case, the U.S. Court of Appeals for the Fifth Circuit reached the opposite conclusion. The Supreme Court granted certiorari to resolve this split of authorities. See e.g. Eastus v. ISS Facility Services, Inc., 960 F. 3d 207 (5th Cir. 2020).

The Supreme Court ultimately held that Saxon fell within the applicable “class of workers” because plaintiff’s job duties regularly involved loading and unloading cargo that would be transported across state lines. The Supreme Court went on to hold that the act of loading and unloading cargo from planes constitutes interstate commerce because it is essential to the transportation of cargo through interstate commerce. As such, Saxon and other cargo ramp supervisors were held to be exempt from FAA coverage.

In its opinion, the Supreme Court rejected the contention that all airline workers are exempt from the FAA and instead used a fact-specific test focused on actual job duties. Employers may want to consider the enforceability of their arbitration agreements under the FAA with specific sets of employees by evaluating the actual job duties and connection to interstate commerce. Further, employers should evaluate state laws on this issue, as such agreements might be enforceable under state arbitration statutes.