Southwest Airlines Co. v. Saxone: Airline Cargo Loaders Exempt from Arbitration

On June 6, 2022, the Supreme Court of the United States ruled in an unanimous opinion in Southwest Airlines Co. v. Saxon, No. 21-309 that airline cargo loaders are exempt from the Federal Arbitration Act (“FAA” or the “Act”) under the Act’s “transportation worker” exemption. The Supreme Court reasoned that while not all employees of an airline are exempt from the FAA, ramp employees who load and unload cargo from planes are part of a “class of workers engaged in foreign or interstate commerce” specifically exempted by the Act. The Supreme Court’s broad interpretation of this exemption permits airline cargo loaders to bring wage-and-hour claims in court rather than being forced into arbitration. This case is the second of three arbitration cases argued before the Supreme Court this term. Crowell previously issued an alert about the first case, Morgan v. Sundance, which held that the courts may not create “arbitration-specific variants of federal procedural rules,” despite the FAA’s “policy favoring arbitration.” The third case, Viking River Cruises v. Moriana, involving FAA preemption of representative claims under California’s Private Attorneys General Act, is pending before the Court.

Latrice Saxon, a ramp supervisor for the airline who frequently loads and unloads baggage, airmail, and commercial cargo on and off airplanes that travel across the country, brought a putative class action alleging wage-and-hour violations under the Fair Labor Standards Act of 1938. The airline sought to enforce an arbitration agreement with Saxon that required individualized arbitration for wage disputes pursuant to the FAA. Saxon opposed arbitration, arguing that she was a “worker[] engaged in foreign or interstate commerce” and thus was exempt from the FAA. The U.S. District Court for the Northern District of Illinois agreed with the airline and found that Saxon did not meet the requirements of being a transportation worker under the FAA. The U.S. Court of Appeals for the Seventh Circuit disagreed and held that ramp agents and their supervisors are transportation workers exempt from the FAA.

The Supreme Court, led by Justice Clarence Thomas, unanimously affirmed the Seventh Circuit’s prior ruling, concluding that Saxon fell within the FAA’s Section 1, which exempts “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.” Justice Thomas explained that “it is ‘too plain to require discussion that the loading or unloading of an interstate shipment by the employees of a carrier is so closely related to interstate transportation as to be practically a part of it.’” As Justice Thomas continued, “[t]hey form ‘a class of workers engaged in foreign or interstate commerce.’”

The Court clarified, however, that the exemption does not cover all employees of major transportation providers, including but not limited to website designers or office workers. Accordingly, the Court rejected Saxon’s industry-wide view that all airline workers fall into the exemption for “foreign or interstate commerce” similar to “seamen” and “railroad workers.” The Court explained that Saxon could not make such a generalization, because it would expand the statutory text. Instead, the Court focused on Saxon’s specific job duties, reasoning that employees like Saxon, who physically load and unload cargo off planes traveling in interstate commerce, play a direct and “necessary role in the free flow of goods” across borders. 

The Court also rejected the airline’s arguments that the exemption applies only to workers who physically transport goods or people across state lines (i.e., pilots, ship crews, and train engineers) and that loading cargo is not a close enough connection to interstate commerce to fall under the exemption. In addition, the Court rejected the airline’s contention that the FAA’s “proarbitration purposes” should weigh against expanding the exemptions.

Justice Thomas, in a footnote, cautioned 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.” He cited a decision by the Ninth Circuit holding that a class of “last leg” Amazon delivery drivers fell within the exemption and a Seventh Circuit decision ruling that food delivery drivers did not. He noted, however, that the Court “need not address those questions to resolve this case.”

In light of this decision, employers may want to consider the enforceability of arbitration agreements under the FAA with specific sets of employees by evaluating the actual job duties and connection to interstate commerce. In addition, employers may want to consider updating their arbitration agreements to provide for the application of a state arbitration law should the FAA not apply, as an agreement that is not enforceable under the FAA may nonetheless be enforceable under state law.