The U.S. Supreme Court decided Bissonnette, et al. v. LePage Bakeries Park St., LLC, et al. on April 12, 2024. In a unanimous decision written by Chief Justice John Roberts, the Court held that a transportation worker need not work in the transportation industry to be exempt from arbitration under Section 1 of the Federal Arbitration Act (FAA) governing "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1.
Brief Background
In the recent Holland & Knight blog posts "Do Food Distributors Meet Federal Arbitration Act's Transportation Worker Exemption?" and "U.S. Supreme Court Hears Argument on Arbitration Exemption for Food Delivery Drivers," we discussed the briefs filed by petitioners Neal Bissonnette and Tyler Wojnarowski and respondents Flowers Foods Inc., LePage Bakeries Park St. LLC and C.K. Sales Co. LLC (collectively, Flowers) and the oral argument before the Supreme Court in Bissonnette, et al. v. LePage Bakeries Park St., LLC, et al. S. Ct. No. 23-51. Bissonnette and Wojnarowski were franchisees who owned the rights to distribute Flowers products in certain territories in Connecticut pursuant to distributor agreements, which incorporated arbitration agreements. Bissonnette and Wojnarowski claimed that their independent contractor misclassification lawsuit against Flowers should not be sent to arbitration because they are part of a "class of workers engaged in commerce" just like "seamen" and "railroad employees" and, therefore, exempt from the FAA. Both the U.S. District Court for the District of Connecticut and the U.S. Court of Appeals for the Second Circuit disagreed, holding that they were not exempt from arbitration, with the Second Circuit stating that the Section 1 exemption is available to workers in the transportation industry only, and Bissonnette and Wojnarowski worked in the bakery industry, not the transportation industry.
Supreme Court's Decision
The Supreme Court held that a transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by Section 1 of the Act. As alluded to during oral argument on Feb. 20, 2024, the justices noted that applying a transportation-industry requirement "would often turn on arcane riddles about the nature of a company's services," and extensive discovery and mini-trials might be necessary in order to determine if a putative employer is in the transportation industry. Instead, the focus should be on "the performance of the work" rather than the industry of the employer, as the Court determined in its 2022 decision in Southwest Airlines Co. v. Saxon. Accordingly, the Court held that the Second Circuit erred in compelling arbitration on the basis that Bissonnette and Wojnarowski work in the bakery industry.
Takeaway
Though it rejected an industry-based test, the Court expressed no opinion of Flowers' alternative arguments in favor of arbitration, including that Bissonnette and Wojnarowski are not transportation workers and are not engaged in foreign or interstate commerce because they deliver baked goods only in Connecticut. Companies may still have these types of arguments, as well as arguments based on state arbitration laws, in order to seek to compel arbitration. But without a threshold requirement that an employer be in the transportation industry, workers in the medical, food and retail industries, among others, where goods are frequently shipped over state lines, will argue that they belong to a "class of workers engaged in foreign or interstate commerce" and, therefore, cannot be compelled to arbitrate their claims, even if they have signed contracts agreeing to arbitrate their disputes. Companies should continue to be vigilant in defining their contractual relationships with independent contractors, franchisees and employees, paying particular attention to the workers' role in transportation of goods across borders, in order to ensure that their arbitration agreements are enforceable.
