Southwest flies into trouble as SCOTUS holds transportation workers exempt from Federal Arbitration Act

Linnet Davis-Stermitiz - Associate | Jessie Garland - Law Fellow | Gupta Wessler

Our client Latrice Saxon loads and unloads cargo for Southwest Airlines. When the airline refused to pay her overtime, she sued on behalf of herself and other underpaid workers. But Southwest then tried to compel arbitration, invoking an arbitration clause that it imposed on Ms. Saxon as a condition of her employment.

Southwest probably expected to win that motion. For decades, conventional wisdom favored an expansive, business-friendly interpretation of the Federal Arbitration Act of 1925—one that has made it easier for corporations to force workers and consumers into arbitration. But this term, in Southwest Airlines v. Saxon, the Supreme Court took a different approach. Following argument by our colleague Jennifer Bennett, the Court zeroed in on the text of the FAA—specifically, how that text would have been understood when the statute was passed in 1925—and recognized an important limitation on what types of workers can be forced into arbitration.

The Court adhered closely to the text of the statute and the historical understanding of its terms and concluded that cargo loaders like Ms. Saxon could not be required to arbitrate.

Section 1 of the FAA exempts from the act “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” And cargo loaders, the Supreme Court has long held, are “engaged in foreign or interstate commerce”—just like seamen and railroad employees. Southwest tried to ignore that history. It insisted that an (unwritten) policy favoring arbitration means that a class of workers can’t be “engaged in foreign or interstate commerce” unless those workers physically cross state lines. But the Supreme Court unanimously rejected Southwest’s invitation to rewrite the statute. Aided by Ms. Bennett’s “seemingly encyclopedic knowledge of interstate labor in 1920s America,” the Court adhered closely to the text of the statute and the historical understanding of its terms and concluded that cargo loaders like Ms. Saxon could not be required to arbitrate.

This outcome is the continuation of a long-running strategy to align courts’ interpretation of the FAA with the way the statute would have been understood at the time of passage. For example, in New Prime Inc. v. Oliveira, 139 S. Ct. 532, 543 (2019), Ms. Bennett won another unanimous ruling along these lines, convincing the Supreme Court to follow the FAA’s original meaning to recognize that the statute applies to fewer types of workers “than might seem obvious today.” And, earlier this term, Public Justice secured another unanimous win for workers in Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1709 (2022), persuading the Court to follow the FAA’s text rather than adopt arbitration-favoring rules that lower courts have “invent[ed].”

Under the Court’s logic in Saxon, modern last-mile truck drivers are also exempt from the FAA, and can’t be forced into arbitration as a condition of their employment.

These cases illustrate a flaw in the conventional wisdom. The FAA, as enacted, wasn’t inherently “pro-business” or “anti-worker.” So consumers and workers can prevail in FAA cases when they make arguments that are rooted in the statute’s text and history. Ms. Saxon’s case illustrates one promising strategy: comparing the types of workers who would have been exempt from the FAA in 1925 and their modern counterparts.

For instance, take last-mile drivers. In 1925, there were last-mile workers who transported goods through just the beginning or final legs of a good’s interstate shipping journey. Back then, last-mile workers would have been understood to be included in section 1’s exemption for workers “engaged in interstate commerce.” See, e.g., Norfolk & W. R. Co. v. Com. of Pennsylvania, 136 U.S. 114, 120 (1890); Philadelphia & R.R. Co. v. Hancock, 253 U.S. 284, 285–86 (1920). So the same is true today: Under the Court’s logic in Saxon, modern last-mile truck drivers are also exempt from the FAA, and can’t be forced into arbitration as a condition of their employment.