The U.S. Supreme Court recently clarified that a worker’s job duties, not their employer’s business, determine whether they qualify as a transportation worker who is exempt from the Federal Arbitration Act (FAA). The FAA exemption frees such workers from the general rule under federal law that workers can be compelled to sign agreements to resolve future employment claims through arbitration rather than the court system.
Class Action Filed Against Bakery Employer Over Wage Disputes
The employer in this case included a parent company and two subsidiaries, which all produced and marketed packaged bakery goods such as Wonder Bread. The workers were franchisees who owned the rights to distribute the bakery’s products. (The Court’s decision doesn’t address whether they were actually independent contractors rather than employees.) The workers claimed they spent at least 40 hours per week picking up the baked goods from a warehouse and delivering them to local grocery stores. Additional duties included finding new retail outlets, advertising, setting up promotional displays, and maintaining inventories for their customers. The workers filed a class action against their employer, alleging unlawful deductions from wages, failure to pay overtime, and unjust enrichment.
Job Duties Determine if Arbitration Exception Applies
The employer tried to get their claims kicked out of the court system and sent to an arbitrator instead, because the workers had signed mandatory arbitration agreements. The FAA generally says arbitration agreements are enforceable under federal law, but it contains an exemption for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The workers claimed they were transportation workers under the FAA and therefore couldn’t be forced into arbitration, but the employer argued that the exception only applied to workers in the transportation industry (such as airlines or trucking companies). The Supreme Court said the employer was wrong – the FAA exception depends on a worker’s actual job duties, regardless of their employer’s type of business. The Court sent the case back down to a lower court to determine whether the workers qualified as transportation workers under the FAA (Bissonnette v. LePage Bakeries Park St., LLC, US, April 2024).
Tips: State laws and court decisions in California, Oregon, and Washington all impose limits on the use of arbitration agreements in employment. In addition, a federal law, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” prohibits mandatory arbitration of certain claims, and the National Labor Relations Board takes the position that arbitration agreements cannot prevent employees from filing complaints with the Board. These limits are complex and continue to evolve. If you are considering requiring new hires to sign agreements to arbitrate future employment claims, you should work with your litigation counsel to ensure that your agreement complies with current law. We will update our Legal Guide, Mandatory Arbitration Agreements, with the Supreme Court’s latest ruling.
