The Federal Arbitration Act strongly favors arbitration and acts as a federal mandate requiring state and federal courts to do the same. However, an exception in Section 1 of the FAA circumvents arbitration clauses in “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” What constitutes a worker “engaged in foreign or interstate commerce” has become a very hot topic in the judicial branch. Is a worker who loads and unloads vehicles transporting goods across state lines engaged in interstate commerce? How about one who works in a warehouse where goods are loaded and shipped but does not interact with the actual modes of shipping (i.e., the trucks, boats, or trains)? While these seem like simple questions, applicable case law indicates they are anything but. Intervention by the U.S. Supreme Court might be required to settle this issue once and for all.
The U.S. Supreme Court has issued several decisions implicating the Section 1 exception. In Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), the court held that a ramp supervisor who supervised a team of ramp agents responsible for loading and unloading cargo onto planes traveling across the country met the plain language of the exemption. Justice Thomas wrote:
We think it equally plain that airline employees who physically load and unload cargo on and off planes traveling in interstate commerce are, as a practical matter, part of the interstate transportation of goods. They form “a class of workers engaged in foreign or interstate commerce.” [Id. at 458.]
In Bissonnette v. Lepage Bakeries Park Street LLC, 144 S.Ct. 905 (2024), the court adjudicated whether franchisees who distributed bakery products within Connecticut fell outside the FAA exemption because they were not engaged in a “transportation industry.” The court did not resolve the issue of whether the particular petitioners met the requirements of the exemption but instead held “The only question before us is whether a transportation worker must work for a company in the transportation industry to be exempt under §1 of the FAA. We conclude that there is no such requirement.” [Id. at 252.]
So, while it’s clear now that the employee need not be employed in the transportation industry, there remains a case-by-case question about whether the employee’s particular responsibilities meet the requirements of the exemption.
Though the Supreme Court has dealt with this issue, a great deal of ambiguity remains unresolved, leading to a circuit court of appeals split on what is required to be a “class of workers engaged in foreign or interstate commerce.” The Fifth, Seventh, and 11th circuits have held that merely handling goods ending in interstate commerce is insufficient to trigger Section 1’s exception. The First and the Ninth circuits have held the opposite.
As it relates to the staffing industry, the Ninth Circuit recently decided the case Ortiz v. XPO Logistics, Randstad Inhouse Services LLC, et al., Case No. 23-55149 (Ninth Cir. 2023), which is known as the “Randstad case.” The plaintiff sued both XPO Logistics and Randstad for alleged violations of California labor law. Randstad and XPO moved to compel arbitration, and the plaintiff challenged the same based on the Section 1 exception in the FAA. Randstad hired and staffed the plaintiff three times at XPO facilities, which received and shipped Adidas merchandise to end consumers and retailers. The plaintiff was a “PIT / Equipment Operator” who did not unload products when they arrived, nor did he load them for eventual distribution. His specific job duties, as he described them, were: “(1) unloading and picking up the packages and transporting them to the warehouse racks to organize them, (2) transport[ing] the packages to the picking section of the warehouse, (3) assisting pickers in obtaining packages so they could be shipped out, and (4) assist[ing] the outflow department to prepare packages to leave the warehouse for their final destination.” Regardless of the plaintiff’s minimal interaction with the goods, the Ninth Circuit held
Though Ortiz moved goods only a short distance across the warehouse floor and onto and off of storage racks, he nevertheless moved them. And not only did he move them, he did so with the direct purpose of facilitating their continued travel through an interstate supply chain. Without employees like Ortiz, Adidas products that arrived at GXO’s warehouse would not be properly processed, organized, stored, or prepared for the next leg of their interstate journey. [Id. at 18.]
Given the circuit court split and the Bissonnette and Saxon holdings, it seems clear that the Supreme Court needs to provide additional clarity on exactly what job responsibilities qualify for the Section 1 exception. Although an employee need not be employed in the “transportation industry,” the worker needs to be involved in interstate commerce to some appreciable level.
Given the FAA’s apparent preference for the enforcement of arbitration clauses, it seems incongruous that any employee who touches a good that eventually ends up in interstate commerce should be exempt from the enforcement of an arbitration clause. The Ninth Circuit’s decision in the Randstad case seems dangerously close to that conclusion. The plaintiff’s testimony indicates that he only moved the goods short distances within the warehouse facility and was unequivocally not involved in actually receiving or shipping the goods (i.e., actually moving them into interstate commerce).
In this day and age, almost everything touches interstate commerce somehow. It just depends on how attenuated you want to get. The issue is that the FAA was drafted to encourage arbitration, not to provide loopholes or extend exceptions beyond any logical reason. To be exempt from the FAA as a worker “engaged in foreign or interstate commerce,” the worker should actually be engaged in that activity. In other words, they should be directly involved in pushing the good(s) into the stream of commerce, not simply moving the goods around a warehouse. The worker who built the goods is not considered “engaged in foreign or interstate commerce,” so it makes no sense that an employee who simply moves the goods around a warehouse is engaged as such. Regardless, it seems imperative that the Supreme Court no longer skirt this issue as it did in Bissonnette but instead further cement the Saxon holding and provide some actionable tests that can be applied, thus unifying the appellate courts in one direction.
Collin Williams is an attorney and is founder and chairman of New Era ADR, a digital platform offering alternative dispute resolution. He may be reached at collin@neweraadr.com.
The post How Should the Federal Arbitration Act Deal With Workers Involved in Interstate Commerce: The <i>Ortiz v. Randstad</i> Conundrum By Collin Williams appeared first on American Staffing Association.