Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Scope of Workplace Arbitration Carveouts Facing High Court Test

March 25, 2022, 9:46 AM

A pair of cases at the U.S. Supreme Court next week will test the expansion of workplace arbitration after years of courts parsing the blurry area of law.

Amazon.com, Inc., Uber Technologies, Inc., and Postmates, Inc., along with states, business groups, and worker advocates will be watching both cases to see how the court rules on the power of the Federal Arbitration Act, the federal law that governs such agreements.

One case will determine which type of transportation workers should be exempt from arbitration agreements, and the other will test whether a unique California law, known as the Private Attorneys General Act, should allow employees to circumvent arbitration pacts.

The Supreme Court in recent decades has repeatedly bolstered the FAA. The issues surrounding arbitration continue to percolate in the courts, and in many cases have had varying results. Exemptions for transportation workers and the California PAGA are examples of how a worker can still successfully circumvent the arbitration process.

Congress, too, has been moving to limit the use of arbitration. President Joe Biden signed one measure into law that carves out cases of sexual assault and harassment from the process. House Democrats have passed an even broader bill effectively banning compelled arbitration of employment-related disputes. The Senate hasn’t voted on the measure.

“The Supreme Court is considering what role arbitration should play in society,” said Imre Stephen Szalai, professor at Loyola University New Orleans College of Law. “These cases could affect the entire modern economy. Over and over the Supreme Court has used arbitration to eliminate class actions. These cases represent the remaining small last chances for class actions to continue.”

Amazon, Gig Impact

The cases will have ripple effects on disputes involving Amazon, major gig companies, and the U.S. Chamber of Commerce, among others, a Bloomberg Law review found. At least nine federal court cases are paused for decisions in Southwest v. Saxon and Viking River Cruises v. Moriana, the review shows. Uber, Handy, DoorDash, and Postmates also have filed Supreme Court petitions for review raising the same issue the justices will confront in Viking. Many more such cases are pending in California, as well.

Most of the paused cases involve Amazon: Five of the six cases in federal court awaiting a ruling in the Southwest case were brought by Amazon delivery drivers who say they lost out on wages and benefits because they were misclassified as independent contractors.

One of those, Amazon.com v. Rittman, has been wending its way through courts for years. Depending on the outcomes in the cases before the high court next week, the drivers could qualify for the FAA exemption, and the retailer could lose the ability to arbitrate their PAGA claims.

Two other cases potentially paused for the Southwest ruling involve UPS, Inc., and an XPO Last Mile Inc. dispute over misclassification of its drivers.

The Chamber of Commerce argues in both Southwest and Viking River Cruises that arbitration is a quicker, simpler process that benefits all parties, and the FAA should be enforced.

“These cases are tackling the issue from different perspectives. They are both important cases for the court to provide clarity about the scope of the FAA, and to enforce it according to its terms,” said Jennifer Dickey, associate chief counsel at the U.S. Chamber Litigation Center.

Beyond Ramp Agents

Latrice Saxon, a Southwest ramp supervisor who oversees loading and unloading passenger luggage, sued the airline for failing to pay her overtime. She said that filling in for ramp agents three days a week qualifies her as a transportation worker exemption because she’s “engaged in foreign or interstate commerce.” This would allow her to sue in court, nullifying the arbitration agreement she signed.

The airline argues that the FAA exemption should be construed narrowly and Saxon wasn’t exempt because she didn’t personally transport baggage. The U.S. Court of Appeals for the Seventh Circuit reversed a lower court’s decision in favor of Southwest, ruling that she should fall under the exemption, while acknowledging other courts have struggled to define who falls under the exemption.

The case has implications beyond airline ramp agents. Amazon, Lyft, Uber, the Chamber of Commerce, and the National Association of Manufacturers have asked the Supreme Court for clarity, arguing the ruling would impact many transportation-related industries.

The Southwest case gives the court the opportunity to clear up confusion created by previous decisions, said Michael Foreman, director of Penn State Law School’s Civil Rights Appellate Clinic. In a 2001 case, Circuit City Stores v. Adams, the court outlined the parameters of the transportation exemption, but didn’t define what it meant.

“The court will have to figure out, what does it mean to move across state lines,” Foreman said.

Viking Case Carveouts

Sales representative Angie Moriana sued Viking River Cruises under the 2004 Private Attorneys General Act, the unique California law that allows employees to bring lawsuits on behalf of the state for labor violations. Unlike individual plaintiffs, a state isn’t bound by an arbitration agreement, so the law has allowed employees to circumvent the agreements they signed.

Moriana filed the lawsuit on behalf of herself and similarly situated workers for minimum wage, overtime, and pay for meal and rest breaks under California law.

The Chamber’s Dickey said that other states will look to the Supreme Court’s ruling and potentially pass similar litigation. Maine, Washington, and Oregon have considered similar laws.

The California attorney general, the U.S. Chamber, Uber Technologies, Postmates, and other major business and advocacy groups have weighed in on the case.

Three cases in California courts are stayed pending a decision in Viking River Cruises. The Ninth Circuit will wait to hold a full panel rehearing of a Chamber challenge to a California law that limited mandatory pre-dispute employment arbitration agreements. Other cases involve wage and hour disputes, and consumer lawsuits, in California federal courts.

“If the court upholds California’s PAGA statute in the Viking case, I can see more states being emboldened to adopt similar PAGA statutes, and this would enable more rigorous, public enforcement of labor and employment codes through the courts across the country, without having arbitration agreements block such attempts at enforcement,” Loyola’s Szalai said.

To contact the reporters on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com; Kathleen Dailey at kdailey@bloomberglaw.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription