SCOTUS Clarifies Reach of FAA Exemption for Transportation Workers

In Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. ____ (2024), the U.S. Supreme Court held that the Federal Arbitration Act’s (FAA) exemption for transportation workers in interstate commerce applies to transportation workers regardless of whether they work in the transportation industry.

Facts of the Case

Respondent Flowers Foods, Inc. produces and markets baked goods that are distributed nationwide. Petitioners Neal Bissonnette and Tyler Wojnarowski owned the rights to distribute Flowers products in certain parts of Connecticut. To purchase those rights, they entered into contracts with Flowers that require any disputes to be arbitrated under the FAA.

Pursuant to the FAA, arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” However, the FAA includes an exception that provides, in relevant part, that the FAA shall not “apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

After petitioners sued Flowers and two of its subsidiaries for violating state and federal wage laws, Flowers moved to compel arbitration. Petitioners responded that they are exempt from coverage under the FAA because they fall within the exception. The District Court dismissed the case in favor of arbitration, concluding that petitioners were not “transportation workers” exempt from the Act under §1. The Second Circuit Court of Appeals ultimately affirmed on the ground that the §1 exemption was available only to workers in the transportation industry, but that petitioners were in the bakery industry.

Supreme Court’s Decision

The Supreme Court unanimously reversed. “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act,” Chief Justice John Roberts wrote.

In reaching its decision, the Court reviewed its prior decisions regarding the exemption. In Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), the Supreme Court recognized that §1 is limited to transportation workers. The Court revisited the scope of the residual clause in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022). It declined to adopt an industrywide approach to §1, rejecting the employee’s claim that she was a member of a “class of workers engaged in foreign or interstate commerce” simply because she worked for an airline and carried out its customary work. According to the Court, the language of §1—referring to “workers” who are “engaged” in commerce—focuses on the performance of work rather than the industry of the employer.

In this case, the Court rejected the Second Circuit’s transportation-industry requirement. As Chief Justice explained:

The application of such a test, however, would often turn on arcane riddles about the nature of a company’s services. Does a pizza delivery company derive its revenue mainly from pizza or delivery? Do companies like Amazon and Walmart—which both sell products of their own and transport products sold by third parties—derive their reve­nue mainly from retail or shipping?Extensive discovery might be necessary to explore the internal structure and revenue models of a company before deciding a simple mo­tion to compel arbitration. Mini-trials on the transporta­tion-industry issue could become a regular, slow, and ex­pensive practice in FAA cases. All this “complexity and uncertainty” would “‘breed[] litigation from a statute that seeks to avoid it.’”

The Court next turned to Flowers argument that the §1 exemption would sweep too broadly without an implied transportation-industry requirement. The justices did not share the concern, noting that as the Court held in Saxon, a transportation worker is one who is “actively” “ ‘engaged in transportation’ of . . . goods across borders via the channels of foreign or interstate commerce.” According to the Court, this requirement “undermines any attempt to give the provision a sweeping, open-ended construction,” instead limiting §1 to its appropriately “narrow” scope.