Supreme Court Broadly Defines Transportation Workers for Purposes of Arbitration Exemption

On April 12, 2024, the U.S. Supreme Court issued a decision that significantly broadens the definition of a transportation worker who is exempt from coverage under the Federal Arbitration Act beyond those working only in the transportation industry.

Background of the Case. The Federal Arbitration Act provides that arbitration agreements involving interstate or foreign commerce (which applies to most employment arbitration agreements) are “valid, irrevocable, and enforceable.” Under the FAA, courts will enforce arbitration agreements according to their (properly drafted) terms. However, there is an exemption to the FAA’s arbitration enforcement mandate for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” and this exemption has long been interpreted to apply only to “transportation workers.”

In Bissonnette v. LePage Bakeries Park St., two individuals worked as distributors for a bakery company, picking up bread and buns and delivering them to local shops. They sued the company for violating state and federal wage laws. Because their Distributor Agreements included arbitration agreements requiring any claim or dispute to be arbitrated under the FAA, the bakery company moved to compel arbitration. The distributors argued that they were transportation workers exempt under the FAA from enforcement of their arbitration agreements. The company argued that the exemption applied only to those working in the transportation industry, meaning those entities whose primary business is the movement of goods or passengers.

The Supreme Court’s Opinion. The Supreme Court held that a transportation worker does not need to work in the transportation industry to be exempt from the FAA’s coverage. There is nothing in the FAA that limits the definition in that manner. But to qualify as a transportation worker, they “must at least play a direct and necessary rule in the free flow of goods across borders.” (Internal quotations omitted).

Lessons for Employers. Employers outside the transportation industry should not blindly assume that all employees may be bound by arbitration agreements (assuming that such agreements are properly drafted in accordance with any state law requirements). If an employee’s duties are directly related to the transportation of good or services – and this extends beyond driving to include activities such as loading and unloading cargo – those employees will be deemed to be “transportation workers” exempt from enforcement of any arbitration agreement.