Supreme Court: Baggage Handler Wins Arbitration Dispute Against Southwest Airlines

​A baggage-handling manager was exempt under the Federal Arbitration Act (FAA) from arbitrating her overtime claims against Southwest Airlines, the U.S. Supreme Court unanimously ruled June 6. 

When the employee came to believe that Southwest was failing to pay her and other ramp supervisors proper overtime wages, she brought a class action against Southwest under the Fair Labor Standards Act. Southwest sought to enforce its arbitration agreement with the worker under the FAA.

"Because this dispute had the potential to declare all airline, trucking and busing industry employees to be transportation workers under the exemption from the FAA, the Saxon opinion is a big win for those industries as a whole," said Keith Wilkes, an attorney with Hall Estill in Tulsa, Okla.

"Instead of exempting ticket agents, ramp workers and even office employees of companies involved in transporting goods in interstate commerce, the court rejected that broad application in favor of focusing on the type of work actually performed by a class of workers here: the physical loading and unloading of cargo for its transportation across state and international borders," Wilkes said.

"It would be a mistake to interpret the decision as a retreat from the court's commitment to enforce mandatory arbitration provisions in employment agreements as a general matter," said Richard Silberberg, an attorney with Dorsey & Whitney in New York City. "The ruling is unlikely to be broadly applied to the enforceability of arbitration provisions in employment agreements in other industry sectors." We've gathered articles on the news from SHRM Online and other outlets on this decision, Southwest Airlines Co. v. Saxon.

FAA Requirements

The FAA requires courts to enforce arbitration clauses in employment contracts. Nonetheless, the FAA has an exemption: It does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." So, the question in this case was whether the employee's job overseeing the loading and unloading of luggage and other cargo placed her in a "class of workers engaged in … interstate commerce."

(SCOTUSblog)

Court Applied FAA Exemption

Writing for the court, Justice Clarence Thomas applied the FAA exemption for workers engaged in foreign or interstate commerce to the employee. The decision rejected calls to exempt virtually all employees of major transportation providers. Nonetheless, it said some workers, including airplane baggage handlers, are exempt even if they don't physically cross a border. The case returns to a lower court, where the airline will have the chance to make other arguments for sending the lawsuit to arbitration.

(Bloomberg)

Amazon Workers Distinguished at Oral Argument

At oral argument, Chief Justice John Roberts asked whether Amazon workers, who package goods to be shipped throughout the country, should be exempt from arbitration. The baggage-handler worker's attorney said they likely should be required to arbitrate, as Congress did not view warehouse workers in the 1920s as working in interstate commerce.

(The Wall Street Journal)

Fact-Specific Opinion

While the case has been watched closely for its implications for other types of workers, such as drivers hired by Amazon or Uber Technologies, the Supreme Court's decision closely followed the facts of the case.

"It's a very narrow decision on a narrow issue in the world of arbitration," said Adam Zimmerman, a professor at Loyola Law School in Los Angeles. Because the court closely followed the case's facts, its decision doesn't have clear ramifications for gig workers or Amazon delivery drivers, he said.

(The Wall Street Journal)

Mandatory Arbitration for Certain Claims Banned

Earlier this year, President Joe Biden signed a bill into law banning enforcement of pre-dispute arbitration pacts for sexual-harassment and sexual-assault claims.

(SHRM Online)