What’s the Scope of the “Transportation Worker” Exemption to the Federal Arbitration Act?

The U. S. Supreme Court recently clarified the scope of the “transportation worker” exemption to the application of the Federal Arbitration Act (“FAA”), 9 U.S.C.S. § 1. Under the FAA, arbitration agreements are generally “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Bissonette v. LePage Bakeries Park St., LLC, 218 L. Ed.2d 204 (April 12, 2024). Nonetheless, certain workers are exempt from the enforceability of arbitration agreements including “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C.S. § 1. In short, “transportation workers” are exempt from the application of the FAA.

The issue in Bissonette was “whether a transportation worker must work for a company in the transportation industry to be exempt under § 1 of the FAA.” The Court held there was no such requirement. The Bissonette court reversed the decision of the Circuit Court of Appeals for the Second Circuit. It held that the Second Circuit erred in compelling arbitration on the basis that petitioners worked in the bakery industry and, therefore, did not fall within the exemption from the FAA provided by §1 of the FAA, because a transportation worker did not have to work for a company in the transportation industry to be exempt under §1 of the FAA.

The Court further clarified that the focus is on “the performance of work” by the employee, not the industry of the employer. Therefore, an employee can work in the transportation industry and yet be covered by the FAA, because the employee is not actually engaged in the performance of any transportation work. And on the flip side, an employee not working in the transportation industry may still qualify for the exemption to the FAA if the employee is actively engaged in the performance of transportation work.

Employers considering the application of Bissonette to their arbitration agreements should evaluate whether their workers are “actively engaged in transportation of good across borders via the channels of foreign and interstate commerce.” Their workers involvement “must at least play a direct and necessary role in in the free flow of goods across the borders.”

An initial question an employer should ask is whether their employees or goods and services cross state or federal borders. And if so, to what degree does the work of their employees play in those activities? If the role is “direct and necessary,” it is likely that arbitration agreements with those employees will be unenforceable under Bissonette. Concerned employers should contact their employment law counsel with any questions or concerns.