While the Supreme Court’s opinion in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022), brought needed clarity to the analysis of the class of workers excluded as “transportation workers” by the residual clause of the Federal Arbitration Act (FAA), many questions remain. We blogged about the Saxon decision on June 8, 2022.
The plaintiffs-appellants in Bissonnette v. LePage Bakeries Park St. LLC., No. 20-1681 (Amended Sept. 26, 2022), who deliver baked goods to stores and restaurants in Connecticut, brought a putative class action against the company and its subsidiaries that manufacture the goods they deliver. The plaintiffs claimed entitlement to unpaid or withheld wages, overtime wages and unjust enrichment under the Fair Labor Standards Act (FLSA) and Connecticut wage laws. The district court initially granted the defendants’ motion to compel arbitration and dismissed the case. In an initial appeal, the Second Circuit panel concluded plaintiffs were not “transportation workers”. See 33 F.4th 650 (2d Cir. 2022). But after Saxon was issued, the panel withdrew the opinion, on May 5, 2022. Yet, after further analysis, the panel majority again concluded that the plaintiffs were not “transportation workers,” regardless of the fact that they drove trucks, because of the industry they were in – the bakery industry, not transportation.
The Legal Issues
The FAA, which provides the federal courts with the authority to enforce arbitration agreements, has an exclusion for contracts with “seamen, railroad employees, [and] any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. This exclusion has been held to apply to “transportation workers”. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001). And an independent contractor can be a transportation worker, as recognized in New Prime Inc. v. Oliveira, 139 S. Ct. 532, 543-44 (2019).
The plaintiffs worked in accordance with a distributor agreement to pick up baked goods from warehouses and deliver them to stores and restaurants in their territories. The plaintiffs generally earned the difference between the price for which they secured the bakery goods and that paid by the stores and restaurants that bought them. Plaintiffs could seek to enhance their profits by increasing sales and also could sell noncompetitive items. The applicable distributor agreement contains a binding arbitration provision providing it is “governed by the FAA and Connecticut law to the extent Connecticut law is not inconsistent with the FAA.”
Because of a dispute over the meaning of the provision language, the appellate court majority concluded “[p]rudence counsels against a remand for arbitration to proceed under Connecticut law.” Consequently, the panel chose to determine whether the FAA exclusion applied. It did not.
The majority found a 1972 Second Circuit decision, Erving v. Virginia Squires Basketball, 468 F.2d 1064, 1069 (2d Cir. 1972), “still vital” where it limited the FAA exclusion “to workers involved in the transportation industry.” And according to the majority, “the distinctions drawn in Saxon do not come into play; those who work in the bakery industry are not transportation workers, even those who drive a truck from which they sell and deliver the breads and cake.”
The majority rejected the dissent’s analysis, which relied on the fact that the plaintiffs are in the “trucking industry.” The majority found:
Although the plaintiffs spend appreciable parts of their working days moving goods from place to place by truck, the decisive fact is that the stores and restaurants are not buying the movement of the baked goods, so long as they arrive. … The commerce is in breads, buns, rolls and snack cakes – not transportation services. [Emphasis added.]
So, the majority concluded that because the plaintiffs do not work in the transportation industry, they did not fall within the FAA exclusion and were properly required to arbitrate.
Interestingly, the majority also identified unanswered questions from the federal courts about who may be a “transportation worker”. First, are workers who transport goods or passengers only within a state “transportation workers” when the goods or passengers come from outside the state? Second, does the exemption apply to the workers of major retailers “who transport goods intrastate within a larger transportation network that is interstate?” The majority didn’t even attempt to resolve those thorny questions.
Finally, in dissent, Judge Rosemary Pooler forcefully argued that the majority ignored Saxon:
[T]he majority, caught flat-footed by Saxon, elects to ignore it. The majority’s revised decision continues to hold that the plaintiffs are not transportation workers, even though they ‘spend appreciable parts of their working days moving goods from place to place by truck,’ because of what their employer, a baked goods company, does generally. From the start, this holding was textually baseless and inconsistent with the decisions of courts nationwide.
The latest Bissonnette opinion illustrates the continuing divisions in the interpretation of the proper scope of the “transportation workers” exclusion. Broadly interpreted, the exclusion would effectively swallow the FAA and defeat its underlying purpose of providing comprehensive dispute resolution. The opinion also demonstrates that more-robust guidance from the Supreme Court as to who is a “transportation worker” is in order.
Bottom Line The Second Circuit majority found that the class of workers defined as “transportation workers” must work in the transportation industry, not the bakery industry.