Aon  |  Financial Services Group

The Supreme Court issued a unanimous decision in Southwest Airlines Co. v. Saxon, holding that cargo loaders are interstate-transportation workers and, therefore, exempt from arbitration agreement enforcement under the Federal Arbitration Act (FAA). In the case, a Chicago-based ramp supervisor for Southwest Airlines filed a federal wage and hour lawsuit on behalf of herself and her coworkers. Southwest then invoked the employees’ arbitration agreement and asked the court to stay or dismiss the claim.

The FAA requires the enforcement of arbitration agreements in employment contracts unless an exception applies. One such exemption applies to “contracts of employment of seamen, railroad employees, and any other class of workers engaged in foreign or interstate commerce.” The Court had to answer whether the ramp workers fell under the residual class of workers engaged in foreign or interstate commerce. They held that cargo loading was inextricably linked with a requirement to move goods across state lines. Because the FAA references “wharfage,” which is a cargo loading facility, they were involved in foreign commerce as contemplated by the Act.

It is important to note that the Court did limit the analysis of class members, requiring that there be a common attribute with one another and the residual clause. Consider discussing with your preferred employment firm to identify when and for which classes of workers this ruling may impede enforcement of its arbitration agreements.