On April 12, 2024, the U.S. Supreme Court, in a unanimous decision, held that transportation workers need not work in the transportation industry to be exempt from coverage under section 1 of the Federal Arbitration Act (“FAA”). Bissonnette, et al. v. LePage Bakeries Park St., LLC, et al., No. 23-51. (See here.) The Court found the determining factor to be the nature of the employee’s work for the company, not what the company does generally.
Petitioners Neal Bissonnette and Tyler Wojnarowski owned the rights to distribute Respondent Flowers Foods, Inc.’s baked goods. To purchase these rights, Petitioners entered into Distributor Agreements with Flowers that require “any claims, disputes, and/or controversy” to be arbitrated under the FAA.
In 2019, Petitioners brought a putative class action alleging that Flowers violated wage and hour laws by taking unlawful deductions from their wages, failing to pay them overtime, and unjustly enriching itself by requiring them to pay for distribution rights and operating expenses. Flowers moved to dismiss or to compel arbitration under the FAA as stated in the Distributor Agreements with Petitioners. But Petitioners argued they fell within the FAA’s exception as truck drivers who deliver baked goods to restaurants and stores for Flowers and therefore were exempt from arbitration.
The FAA provides generally that arbitration agreements are “valid, irrevocable, and enforceable,” 9 U.S.C. §2, except for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
The District Court dismissed the case in favor of arbitration, explaining that for Petitioners to meet the arbitration exemption, they must be “transportation workers.” On appeal, the Second Circuit affirmed the District Court’s decision but held instead that Petitioners were in the bakery industry not in the transportation industry. The Court of Appeal believed the determination should focus on the company’s main source of revenue and whether the work mainly involved the movement of goods or people.
The Supreme Court rejected this analysis, stating that it was too “arcane” and would create “complex riddles” requiring expansive discovery. Instead, relying on precedent in Southwest Airlines Co. v. Saxon, a case involving ramp agents for the airlines, Chief Justice Roberts reiterated that the exemption language of §1—referring to “workers” who are “engaged” in commerce—focuses on the performance of work rather than the industry of the employer. New Prime Inc. v. Oliveira, 586 U. S. 105, 116 (2019). The “linkage” between “seamen” and “railroad employees” is that they both perform transportation work—they are “transportation workers.” Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 118-119, 121 (2001). Thus, when presented with the question of whether the language of the exemption required interstate transportation workers to be employed by an employer in the transportation industry, the Court concluded that there was no such requirement.
In response to concerns raised by Flowers that the ruling might be unlimited in its effect, the Court clarified that the FAA’s exemption applies to those workers who are “actively engaged in transportation of goods across borders via the channels of foreign or interstate commerce” or “at least play a direct and necessary role in the free flow of goods across borders.”
The Court remanded and did not express an opinion on whether or not the Petitioners qualify as transportation workers or if they are “engaged in foreign or interstate commerce” within the meaning of §1. How broadly this decision will be applied to employees who may be “engaged in interstate commerce” remains to be seen.