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SCOTUS examines which transportation workers are exempt from arbitration

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U.S. Supreme Court justices questioned Tuesday how they should determine whether truck drivers delivering baked goods for Georgia-based Flowers Foods are exempt under the Federal Arbitration Act in a case that could have broad implications for employers nationwide.

In oral arguments Feb. 20, Jennifer D. Bennett, counsel for the drivers, cited the high court’s 2022 decision in Southwest Airlines v. Saxon — in which it held that a Southwest ramp supervisor was engaged in foreign or interstate commerce and was therefore exempt under the FAA — to argue that the drivers should be similarly exempt.

However, the 2nd U.S. Circuit Court of Appeals decided the case in Flowers Foods’ favor, holding that the drivers are not exempt from the FAA because “they are in the bakery industry, not a transportation industry.” This constitutes an “additional unwritten requirement” under the law, Bennett said.

“According to Flowers, if the thousands of truck drivers who work full-time hauling its goods were only employed by a trucking company that Flowers had hired to do so, then they’d be exempt transportation workers,” she added. “But, because Flowers essentially created its own in-house trucking company, it says that those same truck drivers are no longer transportation workers. That distinction has no basis in the text of the statute.”

A circuit split

Federal courts have diverged over the meaning of the FAA’s exemption of the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

While the 1st and 7th Circuits have held that the exemption applies to any workers engaged in foreign or interstate commerce similarly to seamen and railroad employees, the 2nd and 11th Circuits take the position that such workers must be employed in the transportation industry, Flowers Foods wrote in its brief to the Supreme Court for the case, Bissonnette v. LePage Bakeries.

Traci L. Lovitt, counsel for Flowers Foods and subsidiary LePage Bakeries, said that the justices should consider the historical context of the FAA’s passage, which occurred in 1925, and why Congress specifically designated seaman and railroad employees under the law.

“By 1925, Congress knew that labor disputes involving transportation industry workers were different,” Lovitt said. “They were unique. They could cause famines in Chicago. And in response, Congress passed two and only two federal arbitration statutes, one governing railroad employees in the rail industry and one governing seamen, who, under the Shipping Commissioners Act, were limited to those in the shipping industry.”

Lovitt also argued that the high court’s 2001 decision in Circuit City Stores, Inc. v. Adams supports the company’s position. In Circuit City, the court held that the FAA’s exemption “is confined to transportation workers,” defined as those workers who are “‘actually engaged in the movement of goods in interstate commerce.’”

Where the court’s Saxon decision fits

Bennett, meanwhile, said that the court’s Saxon decision “lays out a pretty clear test” by which the court can distinguish transportation industry workers from other workers, “which is workers that are directly involved in transporting goods across foreign or state borders.” She faced questions from members of the court including Justice Brett Kavanaugh, however, on how Saxon specifically applies to the truck drivers’ case.

“In Saxon, at oral argument, it was repeatedly stated to us, if we’re talking about a company that is shipping its own goods, those people likely wouldn’t have been railroad employees or seamen at the time,” Kavanaugh said. “It was reassuring […] that the holding in favor of Saxon would be narrow and would not extend to industries other than the transportation industry.”

Lovitt echoed this point, stating that “you have to read those holdings in Saxon in light of the background fact that Ms. Saxon was an airline transportation industry worker.” 

Bennett conceded that while the question of whether the FAA exempts a particular class of workers wasn’t presented in Saxon, a textual analysis of the law would show that seaman, as defined in the FAA, “did not mean somebody who was employed by a company that sold transportation” but instead “plainly meant everybody who worked aboard a vessel.”

But even if the court did land on an interpretation of the FAA’s exemption that is closer to that preferred by Flowers Foods, “Flowers’ [truck] drivers meet its own definition,” Bennett continued. “And so, even if we were to accept every single one of Flowers’ arguments on seamen, they still haven’t shown that this employer-based industry requirement has anything to do with the words of the statute.”

Potential implications for other employers

A number of justices appeared to show concern about the potential ripple effects of a decision in favor of the truck drivers in Bissonnette, given that many companies employ staff to transport goods across state lines.

“I think the number of workers who are going to be exempt and [the] number of companies who are going to have to deal with this is massive if you lose,” Kavanaugh said, speaking to Lovitt. Lovitt provided some additional context on this point, detailing a number of concerns by industry groups that have weighed in as amici in the truck drivers’ case.

“In the past five years, you’ve had cases against Domino’s franchisees, so you’re bringing in every franchise restaurant, which is why the restaurant industry group filed on our behalf,” Lovitt said. “You’re bringing in the medical industry [which] ships like this because they need to get their products very quickly from one place to another. You’re bringing in basically the entire food industry.”

Beyond these case studies, the justices asked about firms that ship goods across state lines on behalf of other entities, such as FedEx, as well as e-commerce companies that while not directly categorized as transportation companies, do operate airlines and trucks that similarly move goods, such as Amazon.

“We now have all these companies that have components of transportation within them, but their workers are doing things, as you say, involving goods that are crossing state lines and that are presumably critical to commerce and national security,” said Justice Ketanji Brown Jackson. “So why would the line be between big companies with in-house transportation arms versus those that use FedEx?”

Lovitt responded by calling attention back to Congress’ intent in passing the FAA. Specifically, she noted the magnitude that labor disputes in the transportation industry had on international and interstate commerce; that specific breadth differentiates such disputes from those involving companies like Flowers Foods.

“In 1925, the railroad labor industry, there were all sorts of industry disputes, but it was only the rail industry dispute that brought Chicago to the point of famine, and that’s when Congress had to intervene,” she said. “Where you start to get the whole of the national economy involved is when you’re talking about the international and interstate shipping of goods and that industry.”

Bennett argued that the question of how workers who transport goods for companies like Amazon fit into the FAA’s provisions is “a difficult question,” but any such inquiries would be in addition to the case at hand.

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