For the second time in two weeks, the U.S. Supreme Court has ruled against a company seeking to compel individual arbitration of Fair Labor Standards Act (FLSA) collective action claims. In Southwest Airlines Co. v. Saxon, the Court held that the plaintiff’s claims were exempt from arbitration under Section 1 of the Federal Arbitration Act (FAA), which exempts from the statute’s ambit “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The decision resolves a split between the Seventh and Fifth Circuits on this technical statutory issue. As in its May 27 ruling in Morgan v. Sundance, the Court based its conclusion on the plain text of the FAA, rather than its pro-arbitration purposes.
In order to move passenger, commercial, and mail cargo, Southwest employs both ramp agents, who physically load and unload baggage, airmail, and freight, and ramp supervisors, who train and supervise ramp agents but also frequently step in to load and unload cargo alongside ramp agents. Saxon brought a putative collective action, alleging that Southwest failed to pay ramp supervisors proper overtime wages. Southwest moved to compel individual arbitration pursuant to an arbitration agreement in Saxon’s employment contract. The district court compelled arbitration, but the Seventh Circuit reversed, holding that Saxon’s claims were exempt from arbitration under Section 1 of the FAA because the act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood when the FAA was enacted in 1925. The Supreme Court affirmed the Seventh Circuit opinion.
Examining the “text” of the FAA, the Court held that Saxon was a “worker” “engaged” in foreign or interstate “commerce” within the meaning of Section 1, based upon the dictionary definitions of those terms as understood during the time the FAA was enacted. It further held that “[c]ontext confirms this reading,” because the application of various canons of statutory construction “point to the same place” as the dictionary definitions. Notably, Southwest argued that Section 2 of the FAA broadly requires courts to enforce arbitration agreements in any “contract evidencing a transaction involving commerce,” while Section 1 provides only a narrow exception. According to Southwest, this demonstrated the FAA’s “pro-arbitration purposes” and counseled in favor of an interpretation that erred on the side of fewer Section 1 exemptions. However, the Court disagreed, explaining that:
To be sure, we have relied on statutory purpose to inform our interpretation of the FAA when that “purpose is readily apparent from the FAA’s text.” AT&T Mobility LLC v. Concepcion, 563 U. S. 333, 344 (2011). But we are not “free to pave over bumpy statutory texts in the name of more expeditiously advancing a policy goal.” New Prime [Inc. v. Oliveira], 586 U. S., at ___ (slip op., at 14). Here, §1’s plain text suffices to show that airplane cargo loaders are exempt from the FAA’s scope, and we have no warrant to elevate vague invocations of statutory purpose over the words Congress chose.
Justice Thomas wrote the opinion of the Court, in which all of the other Justices joined, except for Justice Barrett, who took no part in the consideration or decision of the case.
We will be watching to see if this theme of “text versus statutory purpose” continues to resonate in the two remaining arbitration decisions that are expected from the Court this term.