The U.S. Supreme Court on Monday unanimously ruled that a federal exemption against mandatory arbitration in wage-and-hour disputes for interstate transportation workers covers cargo loaders at Southwest Airlines, enabling a class action suit over overtime pay to proceed.
Justice Clarence Thomas’ opinion in Southwest Airlines Co. v. Saxon said cargo handlers are engaged in interstate and foreign commerce and subject to the Federal Arbitration Act (FAA), which exempts certain classes of transportation workers from being bound by private contracts to protect vital commerce from labor strife. Justice Amy Coney Barrett did not participate in the decision.
Latrice Saxon, a ramp supervisor for Southwest Airlines (NYSE: LUV) at Chicago Midway International Airport terminal, filed a class action over the company’s alleged failure to pay overtime. The supervisors frequently load and unload cargo alongside ramp agents and are eligible for overtime pay, the suit claims. Southwest sought to enforce an arbitration requirement in Saxon’s employment contract and dismiss the suit.
A district court agreed, saying that only those involved in the actual transportation of goods across borders are exempt from arbitration under federal law. But the Supreme Court sided with an appeals court decision that defined cargo loading as a critical component of interstate commerce. It said Saxon’s argument that all airline employees belong to the class of exempt workers was too broad, but that Southwest’s definition of the relevant class as those actually involved in the physical movement of goods was too narrow.
“Saxon is therefore a member of a ‘class of workers’ based on what she frequently does at Southwest — that is, physically loading and unloading cargo on and off airplanes — and not on what Southwest does generally,” Thomas wrote.
The 8-0 opinion stated that loading or unloading shipments is so intrinsic to interstate transportation that it is essentially part of the movement. Physically accompanying freight across state or international boundaries isn’t the sole criteria for determining whether the arbitration exemption applies, it said.
“We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods,” Thomas wrote.
Some court watchers had expected it to side with Southwest because conservative justices have typically favored enforcing arbitration and a conservative majority previously held that the Federal Arbitration Act applies very broadly.
The ruling means that Saxon, and similarly situated workers in other modes of transportation, can bring claims for overtime pay in federal court rather than be forced into arbitration. Companies such as Amazon and Uber had sided with Southwest in briefs filed with the court. The ruling could encourage last-mile delivery drivers to claim they are engaged in interstate commerce and entitled to arbitration even if they don’t cross state lines.
Companies, however, can still pursue arbitration under state laws even if the federal law exempts a particular worker, according to a blog post by Scopelitis, Garvin, Light, Hanson & Feary, a transportation-focused law firm.
Employees who may be exempt from the FAA might still be required to arbitrate their claims under state arbitration statutes, many of which require enforcement of arbitration agreements without an exemption for transportation workers, Theane Evangelis, a partner at Gibson, Dunn & Crutcher LLP in Los Angeles, explained in a written overview of the ruling.
(This story was updated on June 7, 2022, at 4:32 P.M. ET)
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