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In a continuing trend toward the limitation of the enforcement of arbitration clauses in employment contracts, in Southwest Airlines Co. v. Saxon, the Supreme Court of the United States unanimously held that an airport ramp supervisor qualified as an interstate transportation worker and is therefore exempt from the Federal Arbitration Act (“FAA”).
Recent Supreme Court decisions have rejected the growing skepticism toward arbitration as an adequate proceeding to enforce a party’s legal rights and supported a national policy in favor of the enforcement of arbitration provisions and awards. The Saxon decision, however, expands the categories of employees who are exempt from the FAA, thereby invalidating the arbitration provisions in their employment contracts. In Saxon, an airport ramp supervisor brought a putative class action lawsuit under the FLSA against her airline-employer for alleged failure to pay proper overtime wages. The airline sought to enforce the arbitration clause in the plaintiff-employee’s employment contract.
The FAA excludes from coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. The Court held that all workers directly involved in the transportation of goods across state or international borders fall within the FAA’s exemption. Since ramp supervisors assist with cargo loading and unloading, the exemption applies. Accordingly, the arbitration provision in the airport ramp supervisor’s contract was not enforceable.
This decision comes on the heels of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, signed into law on March 3, 2022, which amended the FAA to give individuals asserting sexual assault or sexual harassment claims under federal, state, or tribal law the option to bring those claims in court even if they had agreed to arbitration. In March 2022, the U.S. House of Representatives also passed the Forced Arbitration Injustice Repeal Act (“FAIR”), a bill that seeks to broadly prohibit companies from enforcing arbitration agreements with workers and consumers as to any type of workplace or consumer dispute. The bill is currently in the Senate and has been referred to the Senate Judiciary Committee. Employers should be aware of recent trends against the enforceability of arbitration provisions when drafting and negotiating employment contracts and when disputes arise with employees.
For more information, please contact John Badagliacca at [email protected], or your local FMG attorney.