Supreme Court: Drivers hauling baked goods are in transportation, not baking

But the Supreme Court’s April 12 ruling that they are in the transportation business opens the door for them to take the dispute to court.

That’s because the FAA — in its very first section — exempts from its mandate several types of workers, such as railroad employees and “any other class of workers engaged in foreign or interstate commerce.”

The District Court and the 2nd Circuit found that Bissonnette and  Wojnarowski, described in Roberts’ decision as “franchisees,” were involved in the bakery business rather than as transportation workers involved in “foreign or interstate commerce.” Therefore, the exemption in the FAA did not apply, according to the lower courts.

But the Supreme Court did not agree.

“A transportation worker need not work in the transportation industry to fall within the exemption from the FAA … provided in the Act,” Roberts wrote. “The Second Circuit erred in compelling arbitration on the basis that petitioners work in the bakery industry.”

This is the second time in two years that the Supreme Court has ruled on whether the FAA exemption applies only to workers who are employed by or working as a contractor for an entity that is clearly a transportation company.

In June 2022, the high court upheld a 7th Circuit appellate court decision in Southwest Airlines vs. Saxon that a ramp worker for Southwest (NYSE: LUV) was involved in interstate commerce even though the worker, Latrice Saxon, did not actually transport goods. 

In the decision that the 7th Circuit overturned, the lower court had found Saxon was not involved in interstate commerce and was therefore mandated to take her complaints about wages to arbitration. The appellate decision reversed that and ruled she was a transportation worker, a ruling the Supreme Court affirmed.

The Saxon decision came soon after the original decision by the 2nd Circuit that Bissonnette and Wojnarowski were not involved in interstate commerce and therefore not able to claim the FAA exemption from mandatory arbitration. Post-Saxon, the court took another look at the issue and stuck to its original finding: The Flowers Food route franchisees were in the bakery business, not the transportation business, and needed to arbitrate their pay dispute with Flowers rather than take it to court.

Recapping legal arguments by Flowers — whose products include Wonder Bread and Tastykake — Roberts said the company had asserted that “virtually all workers who load or unload goods, from pet shop employees to grocery store clerks,” could be viewed as being involved in interstate commerce and therefore exempt from arbitration under the FAA.

“We have never understood [the FAA] to define the class of exempt workers in such limitless terms,” Roberts wrote in response. “To the contrary, as we held in Saxon, a transportation worker is one who is actively … engaged in transportation of goods across borders via the channels for foreign or interstate commerce.”

To be exempt under the FAA, Roberts said in echoing Saxon, the worker “must at least play a direct and necessary role in the free flow of goods across borders.”

“Does a pizza delivery company derive its revenue mainly from pizza or delivery?” he asked hypothetically.

Implications for even bigger players

But Roberts then suggested the question could become more complex in coming years: “Do companies like Amazon and Walmart, which both sell products of their own and transport products sold by third parties, derive their revenue mainly from retail or shipping? Extensive discovery might be necessary to explore the internal structure and revenue models of a company before deciding a simple motion to compel arbitration.”

The Supreme Court decision kicks the case back to the lower court “for further proceedings consistent with this opinion.”

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