The U.S. Supreme Court heard oral argument on Feb. 20, 2024, on whether food distributors are exempt from arbitration under Section 1 of the Federal Arbitration Act (FAA), governing "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1.

Brief Background

In a prior Holland & Knight blog post, we discussed the opening briefs filed by petitioners Neal Bissonnette and Tyler Wojnarowski and respondents Flowers Foods Inc., LePage Bakeries Park St. LLC and C.K. Sales Co. LLC (collectively, Flowers) in Bissonnette, et al. v. LePage Bakeries Park St., LLC, et al. S. Ct. No. 23-51. In sum, Bissonnette and Wojnarowski are truck drivers who distributed baked goods for Flowers and claim that their independent contractor misclassification lawsuit against Flowers should not be sent to arbitration because they are part of a "class of workers engaged in commerce" just like "seamen" and "railroad employees" and, therefore, exempt from the FAA. Flowers contends that the Section 1 exemption is inapplicable in this case because it applies only to classes of workers in the transportation industry – i.e., workers engaged by companies that sell transportation services – and Bissonnette and Wojnarowski do not work in the transportation industry.

The U.S. Court of Appeals for the Second Circuit agreed with Flowers that Bissonnette and Wojnarowski were not exempt from arbitration because they worked in the bakery industry, not the transportation industry. The U.S. Court of Appeals for the Eleventh Circuit also has held that a worker's putative employer must be in the transportation industry for the Section 1 exemption to apply, but the First and Seventh Circuits have held that the exemption applies to any worker actively engaged in the interstate transportation of goods. The question presented in the Supreme Court is: To be exempt from the FAA, must a class of workers that is actively engaged in interstate transportation also be employed by a company in the transportation industry?

Oral Argument

During oral argument on Feb. 20, 2024, petitioners' counsel, Jennifer Bennett, urged the Court to reject the requirement imposed by the Second and Eleventh Circuits that the workers' putative employer needs to be in the transportation industry, arguing that there is no basis for that requirement in the text of the FAA and it will be difficult to apply. She argued that numerous questions would need to be answered in each case to determine if the employer is in the transportation industry. Picking up on this point, Justice Alito asked respondents' counsel, Traci Lovitt, if the requirement that the employer be in the transportation industry will involve some difficult line-drawing problems based on how much of a company's work involves transportation. Lovitt responded that it would not because in ninety-five percent of cases it is clear who is in the shipping industry, and for other cases the Supreme Court's 2022 decision in Southwest Airlines Co. v. Saxon could provide guidance on that issue by looking at whether a company is frequently in the business of shipping other people's goods.

But Justice Thomas questioned whether Saxon forecloses the respondents' argument by focusing on the work the individuals perform rather than the industry. Lovitt replied that it did not because it was accepted fact and part of the background of the Court's prior holding that Saxon – a ramp supervisor for Southwest – was a transportation industry worker. Lovitt also noted that the requirement that the employer be in the transportation industry prevents a waterfall of court cases brought by workers of franchise restaurants, the medical industry, the food industry and potentially every retailer who is shipping over interstate borders, even if those workers agreed to arbitrate their disputes.

Takeaway

Much of the oral argument focused on the text and history of the Section 1 exemption and the work of seamen and railroad employees in 1925, but a number of the justices were also concerned with how courts would determine whether a company was in the transportation industry under the Second Circuit's price structure and revenue approach, particularly if the company uses both internal and external workers to transport goods. If either the text of the FAA or the perceived complications in applying the transportation industry requirement lead the Court to reject the threshold inquiry that the putative employer be in the transportation industry, workers in the food and retail industries, among others, will be emboldened to circumvent their arbitration agreements and pursue class actions in the courts.