The Federal Arbitration Act, or the FAA, enforces voluntary arbitration agreements involving federal law, including some employment-related disputes. Section 1 of the Act exempts certain classes of workers from the arbitration requirement, however, including seamen, railroad workers, and workers engaged in foreign or interstate commerce.
So, when employees don’t physically transport goods, can they be engaged in commerce and thus exempt from arbitration? The issue was recently addressed by the U.S. 7th Circuit Court of Appeals (which covers Wisconsin employers).
In 1925, Congress enacted the FAA, favoring arbitration to resolve employment disputes by enforcing certain arbitration agreements. Congress also placed a limit on the Act, however, exempting seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce from arbitration.
In 2001, the U.S. Supreme Court held the FAA exemption applies only to “transportation workers.” Therefore, courts must determine if an employee qualifies as a transportation worker to know whether the Act applies.
Airline supervisor’s claims
Latrice Saxon, a Southwest Airlines ramp supervisor, filed a collective action against her employer for failing to pay ramp supervisors for overtime work under the Fair Labor Standards Act (FLSA). Her job included supervising, training, and assisting ramp agents who are responsible for loading and unloading commercial cargo from airplanes.
Saxon also claimed ramp supervisors frequently filled in as ramp agents in the course of their employment. Although ramp agents were covered by a collective bargaining agreement (CBA), she and other ramp supervisors were excluded and agreed annually under their employment contracts to arbitrate any wage disputes.
Southwest Airlines requested the lawsuit either be put on hold pending arbitration or dismissed in favor of arbitration under the FAA. Saxon argued ramp supervisors are workers engaged in foreign or interstate commerce and therefore are exempt from the FAA.
The United States District Court for the Northern District of Illinois agreed with Southwest and dismissed the case, holding ramp supervisors weren’t engaged in interstate commerce and were required to go through arbitration to resolve the dispute. It reasoned the definition of transportation workers was “actual transportation,” and “merely handling goods” wasn’t sufficient for the arbitration exemption.
Saxon appealed the district court’s decision to the 7th Circuit. The appeal centered on whether she was considered a transportation worker and thus exempt from arbitration under the FAA.
The 7th Circuit first evaluated the FAA’s plain meaning, holding the term “class of workers” in the exemption requires the court to focus on the employee’s broad occupation rather than the individual worker. The court determined Saxon was a member of the airline supervisor class of workers. Therefore, it needed to evaluate whether airline supervisors as a whole are engaged in commerce.
To be exempt from the FAA, a class of workers must be engaged in interstate or foreign commerce. So, the court needed to answer whether the movement of goods is a central part of the class of workers’ job description. The court then compared airline supervisors to the other categories of workers who were expressly exempt from the FAA: seamen and railroad employees. In doing so, the court explained both seamen and railroad employees frequently assist with loading and unloading commercial cargo for transport in the manner ramp supervisors do for airlines.
Because Saxon and other ramp supervisors frequently worked as ramp agents and engaged in loading and unloading cargo, the court found movement of goods is a central part of their job. Therefore, the court reasoned cargo loaders are engaged in the actual transportation of goods and thus engaged in commerce.
Additionally, the 7th Circuit explained ramp supervisors, such as Saxon, are considered cargo loaders. Ultimately, the court determined ramp supervisors are exempt from arbitration under the FAA. Saxon v. Southwest Airlines Co., No. 19-3226 (7th Cir., Mar. 31, 2021).
Whether a certain class of workers is exempt from otherwise enforceable arbitration under the FAA is determined by an independent review of the facts. Be mindful, however, that employees who don’t physically cross state or international lines, such as cargo loaders, could be engaged in foreign or interstate commerce for the purposes of the exemption to the FAA.
If you have concerns about whether an employment dispute may be exempt from arbitration, you should consult with a qualified attorney.