The Supreme Court has recently taken the challenge of assessing the scope and breadth of workplace arbitration provisions under the Federal Arbitration Act (“FAA”) in Viking River Cruises, Inc. v. Moriana, and Southwest Airlines Co. v. Saxon, both of which stand to have far-reaching impacts for employers seeking to resolve disputes with employees outside of court.
The Viking River Cruises case involves a controversy between Viking and its employee Angie Moriana. Ms. Moriana signed an arbitration agreement in which she and Viking agreed to resolve any disputes between them through bilateral arbitration, but nonetheless sued Viking under California’s Private Attorneys General Act (“PAGA”). A unique invention of California law, the PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for violations of California’s Labor Code. In doing so, the statute creates an avenue for employees to circumvent arbitration agreements they’ve signed because it also mandates the availability of representative claims, even when an employee has agreed to resolve disputes through individualized arbitration.
Moriana sued Viking on behalf of “all aggrieved employees” for violations of California Labor Law including failure to comply with its provisions governing minimum wages, overtime wages, meal periods, rest periods, timing of pay, and pay statements. In response, Viking moved to compel arbitration and stay the court proceedings. However, Viking’s motion was denied by the trial court, whose ruling was affirmed by the California Court of Appeal. Thereafter, the California Supreme Court denied Viking’s petition for review, and Viking subsequently petitioned for certiorari to the Supreme Court, which agreed to review the case on December 15, 2021. As a result, the Supreme Court must consider whether the FAA requires enforcement of an arbitration agreement providing that an employee cannot raise representative claims, including claims under the PAGA. Several companies and organizations have weighed in on this issue including, Uber Technologies and Postmates, LLC.
The Court heard oral argument on the case on March 30, 2022, where it seemed reluctant to find that suits brought under the PAGA are resemblant to class actions commonly bound by most arbitration agreements. Notably, the Court honed in on the fact that aggregate claims brought under the PAGA do not have to comply with many procedural requirements that traditional class actions must satisfy, such as numerosity, commonality, and typicality requirements. Similarly, the Justices further noted that PAGA claims are less concerned with the damages of its class members, and more concerned with whether there was a violation of California’s Labor Code. Viking disagreed with the Court’s interpretation on these distinctions, and argued that procedures under most arbitration provisions are incompatible with those under PAGA claims, and also argued that allowing claims brought under the PAGA to circumvent arbitration agreements would be inconsistent with the Court’s prior precedent on these issues. The Court also pressed Moriana on the fact that she could pursue her claim individually under the arbitration agreement, and, based on its line of questioning, seemed interested in determining whether her intent was in fact to circumvent her arbitration agreement.
In Saxon, the respondent, Latrice Saxon, became employed by Southwest as a ramp-agent supervisor, overseeing training, supervising, and assisting ramp agents who load and unload passenger luggage on and off of planes. Like the respondent in Viking River Cruises, Saxon signed an agreement in which she agreed to individually arbitrate wage disputes between she and Southwest. Despite doing so, Saxon brought a putative collective action against Southwest seeking overtime pay under the Fair Labor Standards Act for herself and a nationwide group of ramp-agent supervisors. At the trial court level, the district court ruled that Saxon’s claim was subject to her arbitration agreement since her role as a ramp-agent supervisor did not exempt her from arbitrating disputes with Southwest under the FAA’s “transportation worker” exemption. The Seventh Circuit in turn reversed, finding that the act of loading cargo to be transported interstate is itself commerce, and that airplane cargo loaders, as a class, are thus engaged in commerce similar to that seamen and railroad employees such that Saxon and the ramp supervisors qualify as “transportation workers” exempt under the FAA. Southwest subsequently petitioned for Supreme Court review, who granted Southwest’s request on December 10, 2021.
As a result, the Court is tasked with considering whether the FAA’s “transportation worker” exemption—for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” applies to Southwest’s ramp agent supervisors. Saxon argues that the issue is not solely limited to ramp agent supervisors, but airline employees in general, who she argues are clearly engaged in commerce for the purposes of the exemption. There is currently a split among federal circuits as to whether the “transportation worker” exemption requires that employees themselves cross state lines in order to be covered or if the fact that the goods that they handle have crossed state lines is enough to confer exempt status. It is likely that the Court’s ruling here will resolve this issue.
The Supreme Court heard oral argument on the matter on March 28, 2022, during which it seemed to express significant skepticism of Southwest’s argument that the transportation exemption does not apply to its ramp agent supervisors. For instance, the Court drilled Southwest on the practical differences between the roles of ramp agents compared to that of seamen or railroad workers who are exempt under the statute. Conversely, the Court also pressed Saxon on whether the exemption applies to workers in the gig economy, as well as whether the exemption would apply to warehouse workers and department store employees who do not travel across state lines but handle goods traveling through interstate commerce.
Both cases have attracted considerable attention from large companies like Uber, Lyft, Amazon, and American Airlines who have weighed in on the issue via amicus briefs filed with the Court in one or both cases.
Whatever the result, the outcomes of both cases could have sweeping impacts for employers across many industries seeking to resolve workplace disputes by way of arbitration provisions. Undoubtedly, if the Court were to find in favor of the employee in Viking River Cruises, it may provoke more states to pass laws like the PAGA, in an attempt to bolster employee rights and weaken employers’ ability to enforce arbitration provisions. Similarly, if the Court were to find for the respondent in Saxon, employers in the gig economy, and who employ individuals handling cargo or items passed through interstate commerce could also feel the weight of the ruling’s effects.
While one may attempt to read the tea leaves to determine which way the Court will ultimately sway on these issues, only time will truly tell. However, employers should be on notice that the Court may soon provide much needed answers on these issues.
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