The GigReporter

The argument that individuals do not qualify for the Federal Arbitration Act (FAA) transportation worker exemption because their work is too separate from the interstate flow of commerce is getting harder to make with recent Federal appellate rulings.  It seems the time to explore additional challenges to the FAA exemption has arrived.  One potential argument that has proven more successful concerns the nature of the contract that contains the arbitration provision, because the FAA transportation worker exemption only applies to “contracts of employment.”  Arbitration provisions in 3^rd party agreements or in contracts that are not typically “contracts of employment”, particularly business-to-business agreements, would not be subject to the FAA exemption. 

Lopez v. Aircraft Serv. Int'l, 2024 U.S. App. LEXIS 17784, (9th Cir. July 19, 2024) is an example of a recent dispute around who counts as a transportation worker.  The plaintiff in Lopez, an airplane fuel technician, sued the defendants, aircraft service companies, alleging violations of California labor laws. The defendants moved to compel arbitration, but the motion was denied by the district court, reasoning that even though the plaintiff did not cross state lines or handle goods personally, adding fuel to planes was so closely related to transportation that he qualified for the exemption. On appeal the Ninth Circuit affirmed, relying heavily on the Supreme Court’s decision in Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022)[1], where a person who loaded and unloaded mail, cargo, and baggage on and off airplanes was found to be exempt because the worker was closely tied to the movement of the goods in interstate commerce.   

The overall tenor of these federal appellate decisions has been to define the transportation worker exemption broadly, thus making similar arguments to enforce an arbitration provision unlikely to succeed. By contrast, arguments that business-to-business contracts do not qualify as contracts of employment have had a very good track record of recent success.  It would be extremely important to consider the type of contract your arbitration provision is currently a part of; if the underlying agreement can fairly be viewed as a “contract of employment”, it is time to consider alternatives.  An alternative may be to find ways an arbitration provision can apply to the situation whether by using a TPA like SCI whose contracts are not “contracts of employment” to avoid the exemption or by incorporating arbitration provisions into separate business agreements that may not currently have one.

[1] Saxon had also cited approvingly an earlier Ninth Circuit case, Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020), which held that Amazon last-mile delivery providers qualified for the exemption even without crossing state lines.