The Supreme Court handed down an extraordinarily narrow victory for an equally narrow subset of American workers on Monday. The upshot of the Court’s decision in Southwest Airlines v. Saxon is that workers who “frequently” load and unload cargo for airlines can sue their employers.
But it’s worth emphasizing again how narrow the Saxon decision is. Justice Clarence Thomas’s 8-0 opinion for the Court (Justice Amy Coney Barrett was recused from this case) benefits workers who load and unload cargo for airplanes that travel across state lines – and it may benefit no one else. And, if anything, it reaffirms a previous line of anti-worker decisions lionizing a practice known as “forced arbitration,” which allows companies to strip their employees of their right to sue the employer.
In the workplace, forced arbitration occurs when an employer requires its workers to give up their right to sue the company as a condition of their employment. Under the Court’s decisions in Circuit City v. Adams (2001) and Epic Systems v. Lewis (2018), most employers can order their workers to give up this right under the pain of immediate termination.
Workers forced into arbitration may still bring any dispute they may have with their employer before a privatized arbitration system, but this system overwhelmingly favors corporate parties. A 2015 study of forced arbitration in the workplace found that workers are about half as likely to prevail before an arbiter as they are to prevail in litigation. And when workers do prevail in arbitration, they are typically awarded about a fifth as much money as a worker who prevails before a judge.
The decisions enabling forced arbitration in the workplace were wrongly decided. The Federal Arbitration Act of 1925 does require courts to enforce some contracts that provide for arbitration, but not employment contracts with forced arbitration provisions. As the late Justice Ruth Bader Ginsburg explained in a 2015 dissent, the law was enacted to counter “the reluctance of some judges to enforce commercial arbitration agreements between merchants with relatively equal bargaining power.”
Not only was this law never intended to allow employers to force their workers into arbitration, it was never intended to apply to employment contracts at all. The Arbitration Act explicitly exempts employment contracts involving “workers engaged in foreign or interstate commerce.”
Nevertheless, in Circuit Citythe Court held that the Arbitration Act applies to nearly all workers – even most workers who are engaged in foreign or interstate commerce, under the Court’s current understanding of “commerce.”
That said, Circuit City did hold that “transportation workers” are exempt from forced arbitration, and the Saxon decision holds that workers who “load and unload cargo” for airlines are transportation workers. So, good for those workers. If you happen to be a worker whose job is to handle cargo for an airline, you should now have the right to sue your employer if they violate your legal rights.
But Saxon gave the Court the opportunity to revisit Circuit City more broadly – and it didn’t take that chance. Circuit City, with its egregious misreading of the Arbitration Act, remains good law. That means that the overwhelming majority of workers may still be victimized by forced arbitration.
Circuit City is an embarrassingly poorly reasoned decision
The Circuit City case turned on the proper way to read two separate provisions of the Arbitration Act. The first provides that contracts requiring arbitration typically shall be “valid, irrevocable, and enforceable.” This provision applies only to contracts regarding a “transaction involving commerce.”
The second relevant provision is the one that exempts workers from the Act. It provides that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
To understand how to read these two provisions, it is helpful to understand some constitutional history – and particularly how the Supreme Court has changed its understanding of the word “commerce.” The word “commerce” appears in one of the most important provisions of the Constitution, which states that Congress may “regulate commerce with foreign nations, and among several states, and with the Indian tribes.”
When the Federal Arbitration Act was enacted in 1925, the Supreme Court defined the word “commerce” very narrowly – too narrowly to permit Congress to regulate most American workplaces.
Indeed, seven years before the Arbitration Act became law, in Hammer v. Dagenhart (1918), the Supreme Court struck down a federal law attempting to ban child labor. Dagenhart held that Congress’s power to regulate “commerce … among the several states” was limited to a power to regulate “the transportation of persons[,] land [or] property, as well as the purchase, sale and exchange of commodities. ”
So, as the Federal Arbitration Act was originally understood in 1925, all employment contracts were beyond the scope of the law. Again, the law applies to any “contract evidence of a transaction involving commerce.” But, in 1925, only workplaces that transported persons or property, or that traded in commodities, were subject to the Arbitration Act.
Similarly, the provision stating that contracts involving “employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” would have been read to exempt all workers who would otherwise be subject to the law – that is, all workers who work in transportation or commodities trade.
During the Franklin Roosevelt administration, however, the Court abandoned Dagenhart‘s narrow reading of the word “commerce”; it explicitly overruled Dagenhart in 1941. Under the modern reading of the Constitution, Congress’s authority to regulate commerce extends broadly to all “activities that substantially affect interstate commerce.” Among other things, that means that almost every workplace is subject to congressional regulation.
Thus, if the word “commerce” is given its modern meaning, the Arbitration Act’s provision extending the law to all contracts “evidencing a transaction involving commerce” does apply to nearly all workplaces. But the provision exempting “workers engaged in foreign or interstate commerce” should also be read broadly to exempt virtually every workplace in the United States.
But Circuit City read the first provision broadly, to apply the Arbitration Act to every workplace. Then it read the second provision narrowly, to apply only to transportation workers.
This is anachronistic and wrong. Again, as originally understood in 1925, the law would have been read to apply to no workplaces at all. And, even if the law is read using a modern definition of the word “commerce,” that word appears in the statute twice and should be given the same meaning both times.
Instead, Circuit City defined the word one way when determining the scope of the Arbitration Act itself, then defined it in a different, much narrower way when interpreting the exemption for workers engaged in interstate commerce.
This was wrong, and it has been a disaster for workers who can now be shunted into an arbitration system that does not adequately protect their legal rights.
Saxon creates an exceedingly narrow exception from Circuit City‘s broader rule
Again, the Saxon decision concedes that many workers who load or unload cargo for airlines meet the definition of a “transportation worker.” That’s good news for them.
But the decision is exceedingly narrow. Among other things, Justice Thomas’s opinion rejects the argument that airline workers “as an industry” are transportation workers exempt from forced arbitration. Saxon‘s exemption applies only to workers who “physically load and unload cargo on and off airplanes on a frequent basis.”
It is far from clear whether other airline employees – supervisors who oversee the unloading of cargo but do not handle that cargo, airport workers who check passengers’ tickets, workers who sell tickets, etc. – are exempt from forced arbitration. These workers could very well be the subject of future litigation.
The upshot is that, while Saxon does exempt some workers from forced arbitration, the decision reaffirms Circuit City‘s erroneous reading of the Federal Arbitration Act, and it suggests that any future carveouts from forced arbitration will be narrow.