By John Melcon
In a unanimous decision issued Monday, the Supreme Court refused to reroute an airline cargo loader’s underpayment claims to private arbitration. The case, Southwest Airlines v. Saxon, No. 21-309 (June 6, 2022), is a rare example of the high Court declining to enforce an arbitration agreement, but the decision’s narrow grounds mean it is unlikely to have a major impact on the validity of mandatory arbitration agreements in other contexts.
Like many employees and independent contractors, Latrice Saxon, a “ramp supervisor” for Southwest Airlines at Chicago’s Midway airport, signed a job contract in which she agreed to arbitrate all wage disputes individually. When Saxon later attempted to bring a class action lawsuit against the airline (alleging failure to pay proper overtime wages), Southwest invoked the arbitration agreement to keep her suit from getting off the ground. Southwest relied on the Federal Arbitration Act (“FAA”), which establishes that arbitration agreements in employment contracts are generally valid and enforceable. Saxon countered by citing the so-called “transportation workers exemption” to the FAA, which applies to “workers engaged in foreign or interstate commerce.”
The Supreme Court agreed with Saxon that the exemption covers airline workers who, like her, actually load and unload cargo from aircraft traveling across state or international boundaries, even if the workers do not accompany the cargo across those boundaries. (Although Saxon was a supervisor, the parties agreed that she “frequently” stepped in to handle baggage at the airport.) However, the Court rejected Saxon’s argument that the exemption should apply to all workers in the airline industry, right down to shift schedulers and web designers. The Court also declined to address whether the result would be different if Saxon had been a supervisor who did not actually load baggage but merely supervised those who did.
Although the decision resolves a split among lower courts concerning airline baggage loaders, the Court’s refusal to adopt an industry-wide interpretation of the transportation workers exemption leaves uncertainty as to the validity of arbitration agreements for certain other transportation workers, such as food delivery drivers and “last mile” truckers. It is also unclear how the decision applies to supervisors who, unlike Saxon, do not physically handle cargo on a regular basis. For now, transportation companies should remain cautiously optimistic about the enforceability of arbitration agreements with workers in these roles.
If you have any questions, please contact your Sherman & Howard attorney.