The Employer’s Wage and Hour Advisor

A Tale of Differing Rationales

The Court’s opinion in Bissonnette v. LePage Bakeries Park St., LLC resolved a circuit split between the First Circuit and Second Circuit Courts of Appeals regarding the interpretation of the “transportation workers” exemption. Generally, the FAA provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” A special exception exists for “contracts of employment of seaman, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Workers who fall into this category of employees cannot be compelled under the FAA to arbitrate their claims with companies.

Two franchisees owned the rights to distribute the various packaged baked goods in certain parts of Connecticut. These franchisees, however, brought a putative class action against the company, alleging various wage and hour violations under state and federal law, among other things. The company moved to dismiss or compel arbitration on the grounds that both franchisees had signed contracts requiring them to arbitrate their claims individually. 

Both the District Court and the Second Circuit found that these arbitration agreements were valid, but for different reasons. The District Court found that the franchisees had a “much broader scope of responsibility” under the agreements, which suggested that they were not principally truck drivers. The Second Circuit held that the franchisees were in the “baking industry,” not the transportation industry, and as a result, were not exempt from the FAA’s reach. 

After the appeal was decided, however, the Supreme Court held, in a different case, that “a ‘class of workers’ is properly defined based on what a worker does for an employer, ‘not what [the employer] does generally.” The Second Circuit then reheard the franchisees claims, but stated that to qualify under the exemption, the industry must “peg its charges chiefly to the movement of goods or passengers,” and the revenue coming from that movement is the predominant source of revenue for the industry. However, the Second Circuit’s decision conflicted with other decisions from the First Circuit, and the Supreme Court elected to hear the case.

The Supreme Court Weighs In

In assessing the Second Circuit’s opinion, the Supreme Court asked the question: “Does a pizza delivery company derive its revenue mainly from pizza or delivery?” The question highlighted the difficulty in the Second Circuit’s test, which would lead to discovery to review a company’s revenue models before deciding whether or not the dispute should be subject to arbitration. 

Citing well-established precedent, the Court affirmed its prior position, finding that “a transportation worker is one who is ‘actively’ ‘engaged in the transportation’ of... goods across borders via the channels of foreign or interstate commerce.” Transportation workers, whether in the baking industry or the transportation industry, are all exempt from the FAA’s requirement to arbitrate claims.

Differences in the FLSA’s Transportation Worker Exemption

Wage and hour enthusiasts are familiar with the Fair Labor Standards Act’s (FLSA) exemption that applies to certain transportation workers. Under the Motor Carrier exemption, certain drivers, driver’s helpers, loaders and mechanics are exempt from the FLSA’s requirements, as the Secretary of Transportation establishes qualifications and maximum hours of service for those workers. Similar to the interpretation of the FAA, the transportation involved in the employee’s duties must be in interstate or foreign commerce. But the employer must be a motor carrier or private motor carrier under that law. 

While a truck driver for a bakery may otherwise fall under the FLSA’s motor carrier exemption, that truck driver would still be subject to the FLSA because the driver is not engaged by a motor carrier. The driver for the bakery could be subject to the overtime requirements of the FLSA, but would not be required to arbitrate any disputes regarding those requirements under the FAA. 

The Bottom Baked-Good Line

Ultimately, companies should curtail their use of arbitration with any worker who is actively engaged in transporting goods has executed one, regardless of what industry the company is in—be it baked goods, televisions, or passengers. In addition, companies should carefully consider who it asks to transport those goods, in order to avoid losing out on the protections that a well-drafted arbitration provision can provide—including a waiver of class or collective actions.