The Supreme Court’s Unanimous Ruling in Southwest Airlines v. Saxon: More Questions Left than Answers

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Introduction and Unanswered Questions

            Airplane cargo loaders and ramp supervisors are now able to bring a claim for overtime pay in court, rather than being forced into arbitration.  In a unanimous 8-0 ruling, the Supreme Court adopted a broad interpretation of the Section 1 exemption to the Federal Arbitration Act (“FAA”) in Southwest Airlines Co. v. Saxon (“Southwest Airlines”).

            Latrice Saxon (“Saxon”) is a ramp supervisor for Southwest Airlines.  Her job duties included training and supervising teams of ramp agents who physically load and unload cargo on and off airplanes that travel nationally, as well as loading and unloading cargo herself.  Saxon brought a putative class action against Southwest Airlines under the Fair Labor Standards Act of 1938, alleging that Southwest failed to pay proper overtime wages to ramp supervisors.  Southwest sought to enforce its arbitration agreement and moved to dismiss, since Saxon’s employment contract included a mandatory arbitration clause for wage disputes. Under 9 U. S. C. §1, Saxon argued that ramp supervisors were exempt from the FAA’s coverage since they are a “class of workers engaged in foreign or interstate commerce.”

            Disagreeing with Saxon, the District Court held that those who merely handle goods do not fall within this Section 1 exemption.  The Court of Appeals for the Seventh Circuit reversed the District Court’s decision, holding that, included in commerce, is loading cargo onto a vehicle that will be transported interstate.

            The Supreme Court has only issued three decisions addressing the FAA’s transportation worker exemption, including its recent decision in Southwest Airlines.[1]  In Circuit City Stores, Inc. v. Adams, the Supreme Court concluded that the Section 1 residual clause only covers transportation workers; it does not over workers generally.  In New Prime., Inc. v. Oliveira, decided 18 years later, it was held that a court should determine whether the FAA’s Section 1 exclusion for “contracts of employment” disputes of certain transportation workers applies prior to ordering arbitration.  The Court then applied the transportation worker exception to an interstate truck driver classified as an independent contractor, unanimously deciding that the operating agreement fell within that exception.

            The Supreme Court decisions have left many issues unresolved.  Southwest Airlines merely resolves the narrow issue of whether ramp agents are exempt under Section 1.  Over the years, many lower courts have addressed the question presented in Southwest Airlines, but their interpretation of Section 1 has varied drastically.  Until the Supreme Court answers the unresolved questions discussed below, the lower courts will continue to grapple with Section 1 exemption issues.

Goods Previously Moved Interstate Now Handled by Intrastate Workers

            For workers who only transport goods intrastate, must the goods transported previously undergo an interstate journey for the Section 1 exemption to apply?  Numerous appellate courts have addressed this significant question, and although the Supreme Court acknowledged the split in authority, it expressly denied deciding the question.  Three various answers have emerged from the five circuits that have addressed this issue: 1) a focus on the movement of the goods, rather than the worker; 2) an emphasis on the movement of the worker, rather than the goods; and 3) inquiring into whether the worker is actually in the transportation industry.

The First and Ninth Circuits adopted the first test, emphasizing the movement of the goods.[2]  The courts ask whether the goods being transported are “within the flow of” or “moving in” interstate commerce.  For example, even though Amazon delivery drivers did not drive across state lines, the Circuit Courts held that they were exempt under Section 1 since they were engaged in interstate commerce, and therefore “within the flow of” it. The Seventh and Eleventh Circuits adopted a stricter view, holding that a worker must physically move across state lines with the goods in order to fit within the Section 1 exemption.[3]  Finally, the Second Circuit distinguished between the two tests above, establishing its own test.  The Second Circuit focused on whether the worker is actually in the transportation industry.  If the answer is yes, then the worker falls under the Section 1 residual clause as a transportation worker.[4]

Why exactly does Southwest Airlines affect these decisions?  The Supreme Court found that Saxon fell within the residual clause even though she did not move across state lines.  But by denying to address the circuit splits, the Supreme Court failed to distill which approach it adopted or even preferred.

            Impact on the Gig Economy

            Will the Southwest Airlines decision affect the gig economy?  Uber and Lyft, for example, filed amicus briefs urging the Supreme Court to rule that the Section 1 exemption is not triggered by minimal or incidental interstate travel.  The Supreme Court did include a footnote discussing whether those drivers are an exempt “class of workers;” however, they failed to address the gig economy issue.  The footnote cited Rittman v. Amazon.com, Inc. and Wallace Grubhub Holdings, Inc., nothing that “the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders.”  How far is further removed?  How long must a driver travel to and from airports?  How long must a driver transport goods that come from a different state?  How long must a driver cross state lines?  Lower courts will continue to grapple with these questions until the Supreme Court provides more clarity.

            Conclusion

            While employers are no longer able to prevent airline cargo loaders from litigating their employment disputes by invoking the FAA, many unknowns still exist as to how courts will apply the Section 1 exemption to other workers transporting goods or passengers.  It seems that we will have to wait for another case involving the Section 1 exemption to work its way up to the Supreme Court before we might have a definitive ruling about its scope and application.  Until then, the lower courts will have to find their own way to address the many questions that are bound to come up regarding the application of the Section 1 exemption to the ever-changing transportation industry.

[1] See Circuit City Stores, Inc. v. Adams, 432 U.S. 105 (2001); see New Prime, Inc. v. Oliveira, 139 S.Ct. 532 (2019); see Southwest Airlines Co. v. Saxon, 596 U.S. ____ (2022).  

[2] See Rittman v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020); Waithaka v. Amazon.com, Inc., 966 F.3d 10 (1st Cir. 2020).

[3] See Wallace v. Grubhub Holdings, Inc., 70 F.3d 798 (7th Cir. 2020); Hamrick v. Partsfleet, LLC, 1 F.4th 1337 (11th Cir. 2020).

[4] See Bissonnette v. LePage Bakeries Park St., LLC, 33 F.4th 650 (2d Cir. 2022).