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Southwest’s High Court Case Can Widely Impact Worker Arbitration

Dec. 14, 2021, 6:54 PM

Latrice Saxon was a Southwest Airlines Co. ramp supervisor, overseeing and often moving cargo on and off the carrier’s planes, working extra hours to do so, but without overtime pay.

She sued the airline in 2019, alleging it failed to pay her and hundreds of current and former ramp supervisors time-and-a-half earned for their OT work. The Dallas-based carrier countered that its employee was contractually bound to bring the claim in arbitration, rather than in court. While a federal district judge agreed with the airline, the U.S. Court of Appeals for the Seventh Circuit did not.

Now, the U.S. Supreme Court has agreed to take up the question of whether Saxon’s job qualifies for a carveout from such arbitration agreements, an issue that has split federal appeals courts. The high court’s answer could more firmly establish who falls under the Federal Arbitration Act’s exemptions for certain transportation workers, an outcome broadly affecting the airline industry and potentially rippling out to cases involving Amazon.com Inc. delivery drivers and other gig workers.

“The transportation worker question has been creating a lot of confusion,” said Imre Szalai, a law professor at Loyola University, who specializes in complex litigation and arbitration. “It has the potential to go far beyond the airline industry, and answer questions key to the modern economy. It will certainly impact other cases.”

The FAA exempts employment contracts for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” and for more than two decades cases have percolated in courts on which types of workers qualify for that third category. These cases increased in recent years with divergent court opinions involving a range of industries, including truckers, shippers, and even in one instance, a riverboat bartender.

Airlines for America, the nation’s largest industry group for the airline industry, urged the Supreme Court to take up Saxon’s case to create more certainty around which workers should be exempt from arbitration. The Seventh Circuit ruled in May that the job of cargo supervisors to be considered part of interstate commerce, but the Fifth Circuit has ruled that loading planes shouldn’t fall under the exemption.

Other circuit courts have also weighed in on the transportation worker question, and are far from in agreement on the hard line of what is considered interstate commerce.

“Broad and unpredictable standards for determining when an employee is a transportation worker exempt from arbitration could create state-by-state variation that leads to labor-management friction and inefficiency,” the group said in a statement. “Without intervention, airlines will struggle to maintain the alternative-dispute-resolution procedures that help keep air travel running smoothly and seamlessly nationwide.”

Appeals Courts Split

A 2001 Supreme Court decision found that the FAA exemption should be read narrowly to apply to only “transportation workers,” but the court hasn’t ruled on what types of employees actually qualify for the exemption. A 2019 high court decision sparked a wave of cases in this area because it expanded the exemption to independent contractors, and not just employees.

Notwithstanding the arbitration clause in her employment agreement, Saxon sued the airline over its alleged failure to pay her and hundreds of current and former ramp supervisors for their time-and-a-half work. She noted that in addition to managing workers who load and unload airplane cargo for Southwest, she and other supervisors filled in as ramp agents themselves about three times a week.

The Seventh Circuit found that a cargo loader, “is an essential part of the enterprise of transporting goods between states and countries,” and therefore an exempt transportation worker. Southwest told the Supreme Court the case should be considered because the Chicago-based panel’s decision conflicted with those of other circuits. They noted the direct conflict with the New Orleans-based Fifth Circuit decision about workers who unload cargo.

“This sweeping decision poses a substantial risk of damage to the smooth operation of our transportation infrastructure by undermining national uniformity in employer-employee relations,” the airline said, urging the court to take up the case.

Loyola’s Szalai said the question isn’t just a “two-way split.” There are multiple splits involving transportation workers and interstate commerce, he said, adding that the Eighth Circuit in St. Louis, for example, utilizes a multi-factor test but not all appeals courts use it. The Seventh didn’t use this test in the Saxon case.

Gig Impact?

Southwest also said that the confusion among circuits wasn’t limited to this direct clash between the Seventh and Fifth circuits. They point to rulings from the Boston-based First Circuit and the Ninth Circuit in San Francisco that found Amazon.com “last-mile” delivery drivers, who make intrastate deliveries of goods that have previously traveled interstate, are exempt as transportation workers.

Shannon Liss-Riordan, the attorney for the delivery workers in those cases, said that the Saxon case is distinct from those rulings, and noted that the Supreme Court has repeatedly declined to hear the challenge from Amazon to reconsider the rulings.

App-based food delivery and rideshare drivers who transport goods and people have been found to not be exempt from the FAA, including by the Ninth Circuit in favor of Uber Technologies Inc., and another in the Seventh Circuit in a GrubHub Inc. case, penned by now-Justice Amy Coney Barrett. The Trump-nominated jurist won’t participate in the case before the Supreme Court.

The high court will likely take the opportunity to rule that the arbitration exception should be viewed narrowly, said Sarah Rudolph Cole, a law professor at Ohio State University and director of the school’s Program on Dispute Resolution. She said the case has potential to make broad impact, particularly with the wide use of class action waivers in arbitration agreements.

She said the impact to the last-mile delivery drivers and gig workers will be the “big moneymaker.”

“The delivery driver issue is more common in the courts than a ramp supervisor, but the opinion could be expansive,” she said. “It’s clearly opening the door. The number of these decisions has gone up dramatically and the case with have ripple effects.”

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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