2d Circuit clarifies "transportation exception" under Federal Arbitration Act

 The Federal Arbitration Act says that courts must honor arbitration clauses, including those governing employment relationships. So the arbitration clause that an employee signs with management on her first day of employment means she cannot sue the company in court for discrimination or other claims. One exception to that is the "transportation industry" exception. We have few cases that interpret that exception. This is one of them.

The case Bissonette v. LePage Bakeries Park St., LLC, issued on May 5. Plaintiffs deliver baked goods to stores and restaurants by truck. They claim the defendant denied them overtime pay and other wage and hour violations in violation of the Fair Labor Standards Act and Connecticut law. They want to sue in federal court, however, and not submit to arbitration. The common wisdom is that court is a more favorable forum for plaintiffs than arbitration. Management wants the case sent to arbitration. Plaintiffs claim the transportation industry exception allows them to sue in court. The district court granted defendants' motion to compel arbitration, and the Court of Appeals affirms in a divided vote.

While the FAA says transportation workers are not required to arbitrate, the Supreme Court has never defined what that phrase means. Under the FAA, employment contracts are not subject to arbitration involving "seamen, railroad employees and any other class of workers engaged in foreign or interstate commerce." The class of workers encompassed by the residual clause is "transportation workers." As the Second Circuit sees it, the two examples in the FAA, seamen and railroad employees "locate the 'transportation worker' in the context of a transportation industry." In Erving v. Virginia Squires Basketball, 468 F.2d 1064 (2d Cir. 1972), the Second Circuit said the FAA exclusion is limited to workers involved in the transportation industry. That is still good law, the Court of Appeals says. 

The holding: "an individual works in a transportation industry if the industry in which the individual works pegs its charges to the movement of goods or passengers, and the industry's predominant source of commercial revenue is generated by that movement." Under this interpretation, plaintiffs are in the baking industry, not the transportation industry. Yes, they drive the baked goods to stores and restaurants, but these places are paying for the baked goods, not the transportation that brought the baked goods to these locations. 

Writing for the majority, Judge Jacobs notes this holding leaves open other issues for review: what about (1) people work work in the transportation industry but do not themselves move the goods or passengers, like supervisors, ticket salespersons, and luggage attendants; (2) workers who transport goods and passengers within a state when the goods or passengers originate out of state; (3) people who work for major retailers who transport goods intrastate within a larger transportation network that is interstate, like Amazon? Cases from around the country have addressed these issues, but none in the Second Circuit. If you have a case that deals with these issues, take a look at this ruling and choose from the cases that suit your fancy.

Judge Pooler dissents, stating that the plaintiffs in this case are transportation workers, relying on Justice Barrett's formulation when she sat on the Seventh Circuit:

Both we and our sister circuits have repeatedly emphasized that transportation workers are those who are actually engaged in the movement of goods in interstate commerce. To determine whether a class of workers meets that definition, we consider whether the interstate movement of goods is a central part of the class members’ job description. Then, if such a class exists, we ask in turn whether the plaintiff is a member of it. Sometimes that determination is easy to make—as it is for truckers who drive an interstate route. Sometimes that determination is harder—as it is for truckers who drive an intrastate leg of an interstate route. Whether easy or hard, though, the inquiry is always focused on the worker’s active engagement in the enterprise of moving goods across interstate lines. That is the inquiry that Circuit City demands.

Under this test, Judge Pooler writes, "the plaintiffs here are paradigmatic transportation workers" in part because their work consists of delivering baked goods and their daily work is centered on the transport of goods in interstate commerce.