Supreme Court Clarifies the "Transportation Worker" Exemption in the Federal Arbitration Act

Factual Background

Truck drivers Neal Bissonnette and Tyler Wojnarowski signed an agreement to arbitrate when they purchased the rights to distribute Flowers Foods, Inc. products in certain parts of Connecticut. Flowers is the second largest producer and marketer of packaged bakery foods in the United States, including the famous brand “Wonder Bread.” Throughout the distribution process, Flowers would bake bread and buns and send them to a warehouse in Connecticut where the Petitioners would pick them up and distribute them to local shops within Connecticut.

Bissonnette and Wojnarowski brought a class action lawsuit claiming Flowers had underpaid them and other drivers in violation of state and federal law. Flowers asked the district court to dismiss the case or send it to binding arbitration, as stated in the arbitration agreement.  The District Court dismissed the case in favor of arbitration, ruling that the plaintiffs waived their right to sue in court, and  that the putative class members were not a “class of workers engaged in foreign or interstate commerce” necessary to exclude them from arbitration.

The FAA and Transportation Workers - Historical Background

In 1925, Congress passed the FAA to enforce arbitration agreements within the United States. § 2 of the FAA states generally that arbitration agreements “shall be valid, irrevocable, and enforceable …”  However, at the time, certain industry groups already had sophisticated dispute resolution processes, so Congress carved out certain classes of people exempt from the FAA’s coverage. Those classes of people included seaman and railroad employees.  Thus, Congress crafted the § 1 exemption to the broad authority in § 2 stating: “nothing herein contained shall apply to contracts of employment of seaman, railroad employees, or any other classes of workers engaged in foreign or interstate commerce.”

The § 1 exemption became known as the “transportation worker exemption”. Before Bissonette, the Supreme Court had interpreted this exemption only twice within the past one hundred years. In 2001, the Supreme Court ruled in Circuit City Stores Inc. v. Adams that § 1 exempts from the FAA only “contracts of employment of transportation workers”. In 2023, the Supreme Court ruled in Southwest Airlines v. Saxon that a Southwest baggage ramp supervisor was within “a class of workers engaged in foreign or interstate commerce” and thus exempt from the FAA because the employee was a “member of a class of workers based on what she does at Southwest, not what Southwest does generally”.

Bissonnette

On appeal to the Second Circuit, Flowers successfully argued that Bissonnette and his peers were not “transportation workers” because they worked in the “bakery industry,” not the “transportation industry,” thus the exemption under § 1 of the FAA did not apply, and the workers were required to adhere to the arbitration agreement. A month after the Second Circuit’s Bissonnette decision, the United States Supreme Court decided Saxon, and the Second Circuit granted panel rehearing in light of Saxon. After the Second Circuit affirmed its original decision, the Supreme Court agreed to review the case.

Unanimously, the Supreme Court reversed the Second Circuit’s decision because Circuit City and Saxon did not interpret the § 1 exemption to apply as an industry-wide exemption. Rather, the Supreme Court reasoned that Congress meant what it said when drafting the § 1 exemption to include only the kind of employees that shared similar characteristics to seaman and railroad workers.

Thus, the Supreme Court clarified “a transportation worker is one who is actively engaged in transportation of goods across borders via the channels of foreign or interstate commerce. In other words, any exempt worker must at least play a direct and necessary role in the free flow of goods across borders.”

Takeaways

A careful reading of Bissonnette magnifies what the Court did not decide. The Court expressed no opinion regarding whether the Petitioners themselves were transportation workers within the Court’s clarified rule. Arguably, they were not because their activities were Connecticut-based, and they did not engage in foreign or interstate commerce. Although some worker's rights advocacy groups have heralded Bissonnette a “win” for workers, the Court’s focused ruling—which clarifies the exemption’s requirements—limits § 1 to its appropriately narrow scope.