Transportation Workers Might Be Able to Sue in Court Rather than Be Required to Arbitrate

The exemption for transportation workers from the Federal Arbitration Act’s (FAA’s) mandatory arbitration requirements applies to all transportation workers engaged in interstate commerce, the U.S. Supreme Court ruled on April 12. There is no implied requirement that a transportation worker must be in the transportation industry, such as being employed by FedEx, to fit within the exemption, the court clarified. Instead, the exemption might apply more broadly to other transportation workers in private fleets and enable them to sue in court rather than be required to arbitrate.

The court explained that transportation workers wouldn’t flood courts with new cases as a result of this decision because transportation workers must be engaged in foreign or interstate commerce to qualify for the exemption.

However, at the Feb. 20 oral argument, Traci Lovitt, an attorney with Jones Day in New York City representing the defendant Flowers Foods Inc., argued that if the company lost its argument, lawsuits from the food industry, the retail industry and the medical industry might pile up.

Background

In this case, Neal Bissonnette and Tyler Wojnarowski worked as distributors for Flowers Foods Inc., the second-largest producer and marketer of packaged bakery foods in the U.S. One of Flowers’ flagship products is Wonder Bread. Flowers also makes and markets other baked goods, such as tortillas, bagels, Butterscotch Krimpets and Jumbo Honey Buns, in more than 40 bakeries in 19 states. Flowers owns LePage Bakeries Park St. LLC, a subsidiary that also was a defendant in this case.

Bissonnette and Wojnarowski were franchisees who owned the rights to distribute Flowers’ products in certain parts of Connecticut. Flowers baked the bread and buns and sent them to a warehouse in Waterbury, Conn. Bissonnette and Wojnarowski picked them up and distributed them to local shops.

They allegedly spent at least 40 hours per week delivering Flowers products in their territories. Their jobs also extended to finding new retail outlets, advertising, setting up promotional displays, maintaining their customers’ inventories by ordering baked goods from Flowers, stocking shelves and replacing expired products.

To purchase the rights to their territories, Bissonnette and Wojnarowski signed distributor agreements with Flowers. These contracts have separate arbitration agreements that require any claim, dispute or controversy to be arbitrated under the FAA.

In 2019, Bissonnette and Wojnarowski brought a class action claiming Flowers had underpaid them in violation of state and federal law. They alleged that Flowers had taken unlawful deductions from their wages, failed to pay them overtime, and unjustly enriched itself by requiring them to pay for distribution rights and operating expenses.

Flowers moved to dismiss or to compel arbitration under the FAA, arguing that the contracts required the distributors to arbitrate their claims individually.

Question Before the Court

The only question before the court was whether a transportation worker must work for a company in the transportation industry to be exempt under the transportation worker exemption of the FAA. The act states that it does not apply to “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.” The court noted that it ruled in 2001 that this exemption is limited to transportation workers.

The court determined that Flowers’ argument that plaintiffs must be members of the transportation industry to fit within the exemption failed based on the text of the act, case law precedent and policy.

Text of the Act

In its decision, the court noted that, unlike other industry-specific statutes, the FAA’s exemption refers to “seamen” and “railroad employees” without specifying any industry to which they must belong.

“It would be strange to read the conspicuous absence of similar industry-specific language” in the exemption “as a sign that Congress defined the exemption on an industrywide basis,” the court said.

The more natural inference, adopted in prior Supreme Court case law, “is that seamen and railroad employees share the employment characteristic of being transportation workers,” the court stated.

Policy Argument

Flowers said in its policy argument that the exemption would sweep too broadly without an implied transportation-industry requirement. Because virtually all products move in interstate commerce, Flowers warned that virtually all workers who load or unload goods—from pet shop employees to grocery store clerks—would be exempt from arbitration.

This was a point that Lovitt, Flowers’ attorney, highlighted at oral arguments in response to a question from Justice Brett Kavanaugh about how many workers would be exempt if Flowers lost its argument and how many companies would potentially face lawsuits rather than arbitration.

“It’s massive,” Lovitt answered.

However, the court said it had never interpreted the exemption to define the class of exempt workers in “limitless terms.” Instead, there is the requirement that an exempt transportation worker be actively engaged in the transportation of goods across borders via the channels of foreign or interstate commerce. These requirements limit the exemption to an “appropriately narrow scope,” the court said.

The court expressed no opinion on any alternative grounds in favor of arbitration in this case, such as whether the plaintiffs aren’t transportation workers and whether they aren’t engaged in foreign or interstate commerce because they deliver baked goods only in Connecticut.

The case was remanded for further proceedings consistent with the opinion.

This decision is Bissonnette v. LePage Bakeries Park St. LLC.