In Bissonnette v. LePage Bakeries, a unanimous Supreme Court clarified the scope of the Federal Arbitration Act’s (FAA’s) “transportation worker” exemption by rejecting the industry-based test applied in the Second Circuit. In doing so, the Court closed one potential avenue for businesses to compel arbitration under the FAA, but left open several others.

On April 12, 2024, the US Supreme Court held in Bissonnette v. LePage Bakeries [1] that a worker need not “work in the transportation industry” to fall within the FAA’s “transportation worker” exemption. [2] The Court instead held that “transportation workers” are “connected by what they do, not for whom they do it.” Yet even as it shut the door to arguments based on the industry of the company, the Court left open the possibility that arbitration may still be available when workers engage in purely intrastate transportation or under state arbitration law.

FAA ‘TRANSPORTATION WORKER’ EXEMPTION

While the FAA broadly provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” [3] it also contains an exception specifying that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” [4] This is commonly called the “transportation worker” exemption.

The Supreme Court has addressed the transportation worker exemption four times—first in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), and more recently in New Prime, Inc. v. Oliveira, 586 U.S. 105 (2019), Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), and now Bissonnette.

In Circuit City, the Supreme Court recognized that FAA § 1 is limited to “transportation workers.” In New Prime, the Court made clear that transportation workers can include independent contractors, not just employees. Next, in Saxon, the Court held that a “class of workers,” for purposes of the transportation worker exemption, is defined based on what workers do for their company, “not what [the company] does generally,” [5] and held that loading and unloading cargo from airplanes constitutes interstate commerce.

ROAD TO THE SUPREME COURT

Plaintiffs Neal Bissonnette and Tyler Wojnarowski were independent contractor distributors for Flowers Foods, Inc. As part of Flowers’ “direct store delivery” system, the plaintiffs purchased from Flowers the right to distribute Flowers’ products in specific geographic territories; they then purchased baked goods from Flowers to market, sell, and deliver to retailers. Alleging they were misclassified as independent contractors, the plaintiffs asserted various state and federal wage and hour claims against Flowers on behalf of a putative class and collective. In response, Flowers moved to compel arbitration under the FAA.

The district court granted Flowers’ motion to compel arbitration, finding that the plaintiffs’ “much broader scope of responsibility” under their agreements with Flowers “belie[d] the claim that they are only or even principally truck drivers.” [6]

On appeal, the Second Circuit affirmed, but on other grounds. The Second Circuit held that because the plaintiffs were in the “bakery industry,” their work did not fall under the FAA’s exemption, which applied only to “workers involved in the transportation industries.” [7] The Supreme Court meanwhile issued its opinion in Saxon.

The Second Circuit granted panel rehearing but ultimately adhered to its prior decision, finding that the plaintiffs’ “commerce is in breads, buns, rolls, and snack cakes—not transportation services.” [8] The Second Circuit ruled that a putative employer will fall within the “transportation industry” if it ”pegs its charges chiefly to the movement of goods or passengers” and its “predominant source of commercial revenue is generated by that movement.” [9]

SUPREME COURT DECISION

In reviewing Bissonnette, the Court assessed a single question: whether a transportation worker must work for a company in the transportation industry to be exempt under Section 1 of the FAA. The Court unanimously answered “no.”

The Court first examined its prior holdings in Circuit City and Saxon, explaining that, (1) as noted in Circuit City, for Section 1 to apply the individual must be a “transportation worker” and, (2) consistent with Saxon, the inquiry focuses on the work performed by that individual, not the “nature of the company’s services.”

The Court rejected Flowers’ attempt to point to “historical statutes” involving “rail workers” and “seamen” to show that those “terms were limited to transportation-industry workers” at the time of the FAA’s enactment. On this point, the Court held that the referenced statutes “only prove that where Congress wanted to regulate seamen or railroad employees in a particular industry, it said so explicitly.”

The Court also rejected Flowers’ policy-based argument that Section 1 would “sweep too broadly without an implied transportation-industry requirement.” The Court emphasized that its test for the FAA exemption is already “narrow” and appropriately limited to those employees who are “actively” “engaged in transportation of . . . goods across borders via the channels of foreign or interstate commerce.”

In reaching this conclusion, the Court declined to address Flowers’ alternative arguments in favor of arbitration, namely that (1) the plaintiffs engaged in purely intrastate commerce because their transportation activities were confined to a single state and, (2) in all events, arbitration remains available under applicable state law.

IMPLICATIONS FOR BUSINESSES

After staying silent on the issue for nearly 20 years, the Supreme Court has now addressed the confines of the FAA’s transportation worker exemption three times in just over five years. This is unsurprising given plaintiffs’ ongoing efforts to—where possible—avoid pursuing claims through individual arbitration.

The Supreme Court’s latest opinion gives such plaintiffs a boost in one respect: it emphatically rejects an argument that some defendants had successfully used to invoke the FAA. And, given the range of workers that may be involved to some extent with the transportation of goods in interstate commerce, the decision may inspire more plaintiffs to try dodging arbitration via the FAA’s transportation worker exemption.

At the same time, the Supreme Court acknowledged that uncertainty over the scope of the FAA’s applicability is undesirable. The FAA is not meant to “breed[] litigation,” but to help contracting parties “avoid” it. For that reason, it is unlikely that Bissonnette will be the last word on the scope of the FAA exemption.

In the meantime, businesses across industries should carefully evaluate whether their workers subject to arbitration agreements may have viable arguments under the transportation worker exemption and, if so, whether applicable arbitration agreements properly leverage available state arbitration laws (which ordinarily do not include a corresponding exemption) to help ensure that arbitration remains available.

Many courts have enforced arbitration agreements under state arbitration law, at least in certain jurisdictions. The recent wave of Supreme Court cases on the transportation worker exemption show that having a viable alternative route to arbitration may be a smart strategy—both to preserve the ability to arbitrate and to ease the way there.

[1] Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. ____ (2024) (slip op.).

[2] See 9 USC § 1.

[3] Id. § 2.

[4] Id. § 1.

[5] Saxon, 596 U.S. at 456.

[6] See Bissonnette v. LePage Bakeries Park St., LLC, 460 F. Supp. 3d 191, 199 (D. Conn. 2020).

[7] Bissonnette v. LePage Bakeries Park St., LLC, 33 F.4th 650 (2d Cir. 2022).

[8] Bissonnette v. LePage Bakeries Park St., LLC, 49 F.4th 655, 661-62 (2d Cir. 2022) (panel rehearing).

[9] Id. at 661.

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