The U.S. Supreme Court has unanimously ruled that transportation workers are exempt from mandatory arbitration under the Federal Arbitration Act (FAA) even if they do not work for a transportation company.

The decision has ramifications for employers who rely on arbitration agreements, especially those who employ delivery drivers or other workers tangentially involved in transporting goods.

Path to the Supreme Court

The plaintiffs in Bissonnette v. LePage Bakeries were independent contractor distributors for Flowers Foods, Inc., a subsidiary of LePage Bakeries. They purchased the rights to distribute Flowers Foods products in Connecticut, and then purchased, sold, and delivered those products to retailers. The plaintiffs allege they were misclassified as independent contractors and asserted that the company committed various wage and hour violations.

Although the plaintiffs had signed arbitration agreements, they argued their claims should remain in court because the FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from mandatory arbitration.

A U.S. District Court and then the 2nd U.S. Circuit Court of Appeals sided with LePage, finding that the FAA exemption did not apply because LePage’s primary business was baking snack cakes, not providing transportation services.

However, the Supreme Court disagreed, holding that a worker need not be employed by a transportation company to qualify for the FAA exemption. Rather, the key question is whether the worker is actively engaged in transporting goods across state or national borders as part of their job duties.

Implications for employers

The Bissonnette ruling expands the scope of the transportation worker exemption and will likely lead to more employees challenging the enforceability of their arbitration agreements. Employers should anticipate pushback from any workers whose job duties involve handling or delivering goods that originated out of state, even if transportation is a small part of their role.

To prepare, employers should:

Review job descriptions to accurately reflect employees’ transportation-related duties, as courts may rely on these in determining the applicability of the FAA exemption.
Consider adding an alternative state arbitration law provision to agreements in case a worker is found to be exempt under the FAA.
Ensure arbitration agreements have strong class action waivers and severability clauses to minimize the risk of class action lawsuits.

Unresolved questions

While Bissonnette established that transportation workers need not work in the transportation industry, it left several key questions unanswered:

How regularly must a worker engage in interstate transportation to qualify for the exemption?
Does the exemption apply to last leg drivers? And at what point are goods no longer considered to be traveling in interstate commerce?
Could the exemption arguably be applied to ride-share delivery drivers?

Until these issues are clarified, the full scope of the transportation worker exemption remains uncertain. But the Bissonnette decision makes clear that more workers will likely fall outside the FAA’s arbitration mandate. Employers should carefully evaluate which employees may now be exempt and explore strategies to minimize potential class action risk.