In 2022 the United States Supreme Court issued its opinion in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), a closely watched employment law case involving arbitration clauses in employment contracts. The opinion was a divergence from the Court’s tendency in recent years to favor arbitration. Instead of a company or industry wide exemption for mandatory arbitration, courts must instead use a fact-specific test focused on actual job duties of employees.
In the 2022 case, Latrice Saxon, was a ramp supervisor for Southwest Airlines at Chicago Midway International Airport. SCOTUS ruled that Saxon belongs to a “class of workers engaged in foreign or interstate commerce” to which the Federal Arbitration Act §1’s exemption applies. However, the Supreme Court rejected the contention that all airline workers are exempt from the FAA and instead used a fact-specific test focused on actual job duties.
California is home to over 1.5 million transportation workers. Of these workers, about 312,080 are truck drivers in a variety of industries, and many of these workers are directly related to the movement of goods, even if they do not directly work for a trucking company. For these many California transportation workers, this week’s unanimous United States Supreme Court decision in the case of Bissonnette v. LePage Bakeries Park St., LLC, et al., clarified the scope of the exemption under the FAA will have a substantial impact on employment law litigation with many of these transportation workers. .
In this new case SCOTUS reversed the Court of Appeals for the Second Circuit and held that transportation workers do not need to work in the transportation industry to be exempt from the Federal Arbitration Act’s (FAA) arbitration requirements.
The employer in this case is Flowers Foods, Inc., is a multibillion-dollar producer and marketer of baked goods. that are distributed nationwide. It is the second-largest producer and marketer of packaged bakery foods in the United States It employs approximately 9300 workers. One of its flagship products is Wonder Bread,
Flowers also makes and markets other baked goods such as tortillas, bagels, Butterscotch Krimpets, and Jumbo Honey Buns in more than 40 bakeries located in 19 States. From there, these products are distributed across the country. Some of its subsidiaries use a direct-store-delivery” system in which franchisees buy the rights to distribute Flowers products in particular geographic territories. Those distributors purchase the baked goods from Flowers and then market, sell, and deliver them to retailers.
Neal Bissonnette and Tyler Wojnarowski were franchisees who owned the rights to distribute Flowers products in certain parts of Connecticut. Flowers baked the bread and buns and sent them to a warehouse in Waterbury. Bissonnette and Wojnarowski picked them up and distributed them to local shops. They allegedly spent at least forty hours a week delivering Flowers products in their territories. But their jobs extended beyond carrying the products from Point A to Point B. They also found new retail outlets, advertised, set up promotional displays, and maintained their customers’ inventories by ordering baked goods from Flowers, stocking shelves, and replacing expired products.
To purchase the rights to their territories, Bissonnette and Wojnarowski signed Distributor Agreements with Flowers. Those contracts incorporate separate Arbitration Agreements that require “any claim, dispute, and/or controversy” to be arbitrated under the Federal Arbitration Act.
In 2019, Bissonnette and Wojnarowski brought a putative class action claiming that Flowers had underpaid them in violation of state and federal law. Flowers moved to dismiss or to compel arbitration under the FAA, arguing that the contracts required the distributors to arbitrate their claims individually. The District Court dismissed the case in favor of arbitration. The Second Circuit Court of Appeals affirmed on the aground that Bissonnette and Wojnarowski” are in the bakery industry” and not the transportation industry. And under Circuit law, the panel explained, §1 of the FAA exempts only ” ‘workers involved in the transportation industries.’ “
A month after the Second Circuit decided the appeal in Flowers, SCOTUS decided Southwest Airlines Co. v. Saxon, 596 U. S. 450 (2022). In that case, SCOTUS determined that a ramp supervisor who “frequently load[ed] and unload[ed] cargo” from airplanes belonged to a “class of workers engaged in foreign or interstate commerce.” Id., at 463. It held that a “class of workers” is properly defined based on what a worker does for an employer, “not what [the employer] does generally.” Id., at 456.
The Second Circuit granted panel rehearing in the Flowers case – in light of Saxon – but adhered to its prior decision.
In the present Flowers case, SCOTUS again was asked to consider the scope of the FAA §1 exclusion clause as it did in Saxon, where it expressly declined to adopt an “industry wide” approach of the sort Flowers advances here.
It concluded “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act. The Second Circuit accordingly erred in compelling arbitration on the basis that petitioners work in the bakery industry.”
“In other words, any exempt worker ‘must at least play a direct and ‘necessary role in the free flow of goods’ across borders.- 596 U. S., at 458 (quoting Circuit City, 532 U. S., at 121). These requirements “undermine[] any attempt to give the provision a sweeping, open-ended construction,” instead limiting §1 to its appropriately “narrow” scope. Id., at 118. * *
“The judgment of the Second Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.”