On April 12, 2024, the U.S. Supreme Court issued a unanimous decision holding that a transportation worker does not need to work in the transportation industry to be exempt from coverage under § 1 of the Federal Arbitration Act (FAA).  Rather, employees exempt from coverage under the FAA are those who are engaged in transportation work.

In Bissonnette et al v. LePage Bakeries Park St., LLC et al., the Petitioners owned the rights to distribute Respondents' baked goods  in certain parts of Connecticut.  As part of that ownership, they signed an agreement to arbitrate claims.  When the Petitioners sued the Respondents for violating state and federal wage and hour laws, the Respondents moved to compel arbitration. 

Section 2 of the FAA provides generally that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Section 1 of the FAA contains an exception specifying that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The Petitioners asserted that they fall within the FAA's exception, and therefore could not be compelled to arbitrate under the FAA.

The District Court dismissed the case in favor of arbitration, and the Second Circuit Court of Appeals affirmed on the ground that the §1 exemption was available only to workers in the transportation industry, and Petitioners were in the bakery industry. Because the Second Circuit applied an industry-based standard, as opposed to a standard based on the worker's duties, and because this standard conflicted with other U.S. Circuit courts, the U.S. Supreme Court granted certiorari.

The Supreme Court reviewed its historical interpretation of the FAA in deciding this case, and in particular, focused on its recent decision in Southwest Airlines Co. v. Saxon, 596 U. S. 450 (2022), which was decided only a month after the Second Circuit's decision in the instant case. In that case,  the U.S. Supreme Court determined that a Southwest Airlines ramp supervisor who frequently loaded and unloaded cargo from airplanes belonged to a “class of workers engaged in foreign or interstate commerce.” The Court further emphasized that the portion of Section 1 of the FAA which refers to a “class of workers” is properly defined based on what a worker does for an employer, not what the employer does generally.  To hold otherwise would result in extensive discovery or mini trials over the industry in which the employer is engaged.

Thus, in the case currently before the Supreme Court, it does not matter that Petitioners work in the baked goods industry. There is no requirement that a worker must work in the transportation industry to be exempt under Section 1 of the FAA.  Rather, the link between the type of workers identified in Section 1 of the FAA, i.e., seamen and railroad employees, is that they are transportation workers. Therefore, consistent with the Court's decision in Saxon, to be exempt from the FAA's mandate to arbitrate claims, an employee must be a transportation worker.  A transportation worker is one who is actively engaged in transportation of goods across borders via the channels of foreign or interstate commerce.

Although the Court confirmed the definition of those workers who are exempt from the FAA's covered, the Court left to the lower court questions regarding whether the Petitioners were transportation workers and whether they engaged in foreign or interstate commerce if they only delivered baked goods in Connecticut.

If you have any questions about this legal update, arbitration agreements, enforcement of agreements to arbitrate, or are in need of labor and employment advice, please contact Cindy Cieslak at (860) 361-7999 or [email protected], or any other attorney at Rose Kallor, LLP with whom you regularly work. Rose Kallor, LLP provides a full range of labor and employment counseling to private and public-sector employers.