SUPREME COURT RULING: Transportation Industry Not Only Industry Employing ‘Transportation Workers’ Exempt from Arbitration Under Federal Arbitration Act

By Staci Cassidy, J.D., Senior Vice President, PartnerSource

Does your company transport good across state lines? Even if you are not classified as a transportation company, this U.S. Supreme Court ruling may apply to you.

The Federal Arbitration Act (“FAA”) was passed in 1925 in an effort to expedite the resolution or settlement of disputes at a time when courts’ dockets were backlogged, resulting in extended delays in resolution and higher costs. The FAA therefore favors arbitration, specifically stating arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. §2.  Of additional significance, the FAA preempts state law that impedes arbitration. Therefore, the FAA governs the majority of our clients’ arbitration policies used to resolve claims of negligence arising under their Texas injury benefit programs. 

However, the FAA contains an exception to enforcement of arbitration in contracts of employment for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C §1.  In its decision in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the U.S. Supreme Court read the general phrase “class of workers engaged in foreign or interstate commerce” to be controlled and defined by reference to the specific categories “seamen” and “railroad employees” that preceded it. The Court said what links “seamen” and “railroad employees” is that they are both “transportation workers.” Therefore, the Court said the residual clause “any other class of workers engaged in foreign or interstate commerce” must also be “transportation workers.” Circuit City, 532 U.S. at 118-119,121.

Prior to April 12, 2024, our clients in the transportation industry primarily drew challenges to arbitration from employees claiming they fell within the exemption afforded to “transportation workers,” under §1 of the Federal Arbitration Act.  However, on April 12, 2024, in its decision in Bissonnette et al. v. LePage Bakeries Park St. LLC, Case No. 23-51 (U.S. Apr. 12, 2024),  the U.S. Supreme Court held a transportation worker does not have to work for a company in the transportation industry to be exempt under §1 of the FAA.  

Again referencing the specific classes of workers, “seamen” and “railroad workers,” the Court explained what connects these classes of workers is “what they do, not for whom they do it.”  Bissonnette, at 7. Therefore, regardless of what industry employs the worker, to qualify as a transportation worker exempt under §1 of the FAA, the worker must “actively engage in transportation of . . . goods across borders via the channels of foreign or interstate commerce,” or stated another way, “at least play a direct and necessary role in the free flow of goods across borders.” Bissonnette, at 9.

So what does this decision mean to you?  If you are in the transportation industry, you are likely familiar with the exemption for transportation workers under the FAA. If your company does not transport goods interstate, you can argue the exemption does not apply to any of your employees regardless whether they are a truck driver, dispatcher or freight handler. If your company does transport goods interstate, you may want to consider alternative avenues of dispute resolution or alternative language to enforce arbitration across all classes of workers, including transportation workers. 

If you are not in the transportation industry, the significance of this case likely hinges on the number of workers you employ in Texas who play a direct and necessary role in the free flow of goods across borders.

To learn more about how this case affects enforcement of your arbitration policy, please contact your PartnerSource team leader for information and any alternatives you may want to consider.