The courts will generally enforce employee arbitration agreements via the Federal Arbitration Act (“FAA”)[1]. However, a “transportation workers” exemption exists under the FAA. On April 12, 2024, the United States Supreme Court issued a short, unanimous Opinion finding that two baked goods distributors are “transportation workers” exempt from the FAA. This Opinion expands the class of individuals covered by the FAA’s “transportation workers” exemption.

Neal Bissonnette and Tyler Wojnarowski, the two named plaintiffs of a proposed Fair Labor Standards Act collective class against Flowers Foods, Inc. et al. delivered baked goods on behalf of Flowers in Connecticut. Flowers classified Bissonnette and Wojnarowski as independent contractors. While Bissonnette and Wojnarowski could distribute competing products, the vast majority of their working hours required the distribution and marketing of Flowers’s products. Bissonnette and Wojnarowski purchased the rights to distribute in their respective territories from Flowers. Such purchase agreement included a mandatory arbitration provision.

The District Court dismissed the collective action and compelled arbitration. The Second Circuit affirmed, deciding that Bissonnette and Wojnarowski were not employed in the “transportation industry.” A panel of the Second Circuit reheard this matter in light of the Supreme Court’s intervening Opinion in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022).

Saxon found that a baggage handler for Southwest Airlines was a “transportation worker” and exempt from the FAA. However, on rehearing, the Second Circuit affirmed the prior panel’s decision, again on the ground that Bissonnette and Wojnarowski were not employed in the “transportation industry.”

The Supreme Court reversed, holding that the relevant inquiry is the employee’s job duties for the employer. The employer’s industry is irrelevant. However, for the employee to be exempt from the FAA, the employee must “play a direct and necessary role in the free flow of goods across borders[2].” The holding appears to be limited to those individuals actively engaged in the transportation of goods and adjacent services, rather than a limitless category.

Employers should examine the job duties that certain employees fulfill within their companies. For example, employees of a large, national retailer that customarily make local deliveries might be exempt from arbitration under the FAA. On the other hand, a traditional retail employee that stocks the same large, national retailer’s shelves likely would still be subject to the FAA. Employers should consider varying the roles that employees fulfill if the employer utilizes arbitration agreements. An employer may unintentionally exempt an employee from arbitration, otherwise.

The courts find most employment situations subject to arbitration if a valid arbitration agreement exists. Courts have previously held that the FAA is wide-ranging. Regardless, employers should be aware of this growing FAA exemption.

[1] Some states prohibit arbitration agreements for certain classes of employees as a matter of statutory law and/or public policy. Those specific prohibitions will not be addressed in this article.

[2] Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. ___ (2024) (Slip Op. at 5-6)