Decision Alert: Supreme Court Unanimously Vacates Second Circuit’s Transportation-Industry Requirement For Federal Arbitration Exemption

On April 12, 2024, the Second Circuit suffered another unanimous reversal by the Supreme Court. In Bissonnette v. LePage Bakeries Park St., Chief Justice Roberts delivered the opinion of the Court, holding that a worker need not work for a company in the transportation industry to be exempt from the Federal Arbitration Act (FAA).

As previously summarized in Dykema’s March 2024 edition of Last Month at the Supreme Court, Neil Bissonnette and Tyler Wojnarowski are commercial truck drivers who, on behalf of themselves and those similarly situated, sued a bakery conglomerate (Flowers) for violating state and federal wage laws, alleging that they had been misclassified as independent contractors. When Flowers moved to compel arbitration under its distributor agreement, Bissonnette and Wojnarowski argued that they were exempt from the arbitration clause under a provision of the FAA that exempts those “engaged in interstate commerce.” The Second Circuit ruled that such commercial truck drivers were not exempt from the FAA because they were not employed specifically by a company in the transportation industry.

Rejecting that decision, the Supreme Court focused on its precedent noting that a class of workers is defined by what kind of work they do for their employer and not what an employer does generally. The Court also noted its prior holding that Section 1 of the FAA, which exempts from the FAA classes of workers such as “seamen” and “railroad employees,” was meant to apply to transportation workers more generally. The Court took issue with the Second Circuit’s conclusion that a company must be in the transportation industry for its workers to be exempt from the FAA. Imposing such a requirement, the Court said, would necessitate additional discovery on that specific issue before determining whether parties were exempt from the FAA. Finally, the Court rejected the argument that Section 1 would sweep too broadly without a transportation-industry-specific requirement, noting that its precedent had already established that a worker must at least play a direct and necessary role in the free flow of goods across borders to take advantage of Section 1 of the FAA.

Takeaway

• Without a transportation-industry employer requirement in Section 1 of the FAA, companies in all industries may find it more difficult to enforce arbitration clauses against many of their workers if the workers can argue that they play a direct and necessary role in the free flow of goods across borders.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, Monika Harris, Puja Valera, or A. Joseph Duffy, IV.