SCOTUS Nixes Forced Arbitration Clause in Southwest Employment Contract of Cargo Ramp Supervisor

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In a unanimous 8-0 decision, in Southwest Airlines Co. v. Saxon, the U.S. Supreme Court (Court) held that airline cargo ramp supervisors that assist with loading and unloading cargo constitute a class of workers engaged in foreign or interstate commerce and are exempt under the from the scope of the Federal Arbitration Agreement (FAA). Justice Thomas authored the opinion on behalf of the Court (Justice Barret was recused from the case) and set forth a two-part analysis that (1) defined the relevant “class of workers” and (2) determined whether the class of worker is “engaged in foreign or interstate commerce.”

The Facts

Southwest Airlines (Southwest) employs ramp agents who physically load and unload cargo and employ ramp supervisors that supervise ramp agents and also assist with loading and unloading cargo. The petitioner, Latrice Saxon, is a ramp supervisor employed by Southwest who brought a putative class action against Southwest for failing to pay proper overtime wages. Saxon’s employment agreement contained an arbitration clause requiring her to arbitrate wage disputes individually. Southwest sought to compel arbitration under the FAA. Saxon invoked the exemption under Section 1 of the FAA which exempts contracts of employment of “seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce” from enforcement under the FAA. The District Court held that only “only those involved in actual transportation and not the mere handling of goods” fell within the exemption. The Seventh Circuit Court of Appeals reversed, and the Supreme Court granted certiorari.

Defining the “class of workers” exempt under the FAA transportation exemption.

The Court rejected Saxon’s industry-wide definition of the term “class of workers” which would have exempted all employees employed in the airline transportation industry. Similarly, the Court rejected Southwest’s narrow construction of the term which would have limited the class of workers to only those who actively engage in interstate commerce on a daily basis. Instead, the Court defined the term “class of workers” based on the actual work performed by the worker.
It was undisputed that ramp supervisors frequently load and unload airline cargo. Therefore, the Court determined that Saxon was a member of a class of workers that physically load and unload airline cargo on a frequent basis.

Defining “engaged in foreign or interstate commerce.”

Relying on canons of statutory interpretation and context, the Court held that the transportation exemption of the FAA includes any class of worker that “plays a direct and necessary role in the free flow of goods across borders.” The Court stated that cargo loaders that “load cargo on a plane bound for interstate transit are intimately involved with commerce of that cargo.” The Court flatly refused to conclude that cargo loaders were within the scope of the FAA based on the FAA’s “pro-arbitration purposes” because the plain text indicated that cargo loaders are exempt from the FAA’s scope.

What This Means to You

The Court’s holding is decidedly limited and leaves open the potential for future litigation regarding workers with duties further removed from the stream of commerce. The court did not address whether the mere supervision of cargo loading alone would be enough to exempt a class of workers from the FAA. Further, the Court acknowledged that a fact-dependent analysis must be undertaken when a class of workers is engaged in activities “further removed from the channels of interstate commerce.”

The Labor and Employment team wishes to gratefully acknowledge the significant contribution of Haley Robinson, a summer associate.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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