The Supreme Court of the United States decided on April 12, 2024 Bissonnette v. LePage Bakeries Park St., LLC. The central issue revolved around the Federal Arbitration Act (FAA) and its applicability to workers engaged in interstate transportation. The FAA exempts โtransportation workersโ who engage in foreign or interstate commerce.
The two petitioners had entered into distribution agreements with Flowers Foods Inc., a company responsible for producing and distributing bakery products nationwide. The petitioners' responsibilities were to collect baked goods from local warehouses and distribute them to stores and restaurants. They were compensated based on the difference between the acquisition and sale prices. Although they could sell non-competitive products, their main job was to distribute Flowers' products full time. The distribution agreements included an arbitration agreement that required any dispute to be resolved through binding arbitration under the FAA.
The critical issue before the Supreme Court was whether these dealers qualified as โtransportation workersโ exempt from arbitration under Section 1 of the FAA. The United States Court of Appeals for the Second Circuit had previously ruled that the plaintiffs did not qualify as transportation workers because they did not work for a company specifically in the transportation industry; rather, the company was in the baking industry.
In a brief, unanimous opinion by Chief Justice John Roberts, the Supreme Court vacated the decision and remanded her into custody. He held that plaintiffs do not need to work in the transportation industry to fall within the โtransportation workerโ exemption from arbitration. The Court clarified that the FAA exemption applies to those workers who "actively participate in the transportation of goods across borders through the channels of foreign or interstate commerce" or "at least play a direct and necessary role in the free flow of goods across borders. "
Implications for employers
The Supreme Court's decision has significant implications for employers, particularly those who use workers involved in interstate transportation:
- Clarity on FAA exemption. The ruling clarifies that to be exempt from the FAA, a class of workers actively engaged in interstate transportation does not necessarily need to be employed by a company exclusively in the transportation industry. Employers should recognize that even if their workers are not directly employed by a transportation company, they may still fall within the FAA exemption if their primary duties involve the interstate movement of goods.
- Risk mitigation for employers. Employers should be careful when classifying workers as independent contractors. Employers should evaluate whether their workers' duties intersect with the transportation of goods across state lines and consider FAA implications when drafting employment and independent contractor agreements. Employers may also consider whether to rely on state arbitration laws as an additional or alternative way to ensure the enforceability of their arbitration clauses.
- Industries particularly affected. Although the Court's opinion expressly refers to how any While the industry may be using FAA-exempt transportation workers, its effects will be felt most strongly by companies that regularly deliver, ship, or distribute physical goods across state lines. Those industries include traditional delivery and transportation services, but may also include the healthcare, retail, restaurant, and hospitality industries.
The Court's unanimous decision reinforces the need for employers to carefully evaluate the nature of their workers' obligations, especially when those obligations involve transportation across state lines. Employers should seek legal guidance to navigate the complexities of labor and contractor agreements and the FAA to avoid potential disputes and ensure the enforceability of their arbitration clauses.
The information contained in this alert is for the education and general knowledge of our readers. It is not designed to be, nor should it be used as, the sole source of information when analyzing and resolving a legal problem, and it should not substitute legal advice, which is based on specific factual analysis. Additionally, the laws of each jurisdiction are different and constantly changing. This information is not intended to create, and its receipt does not constitute, an attorney-client relationship. If you have specific questions about a particular factual situation, we recommend that you consult the authors of this publication, your Holland & Knight representative, or other competent legal counsel.
