The Supreme Court ruled unanimously on April 12 that a federal appeals court should not have dismissed a delivery driver’s proposed class action lawsuit over compulsory arbitration.
In the case, the Supreme Court was asked to determine whether truck drivers for the company that makes Wonder Bread are considered transportation workers who are exempt from the Federal Arbitration Act (FAA).
The FAA, enacted in 1925, contains a provision shielding from compulsory arbitration all “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
The case comes after the Supreme Court held in Southwest Airlines Co. v. Saxon (2022) that cargo loaders for airplanes are a “class of workers engaged in foreign or interstate commerce” and are, therefore, allowed to opt out of arbitration. The occasional border crossing isn’t enough to make interstate transportation a central component of an employee’s job, the court ruled at the time.
Companies often prefer arbitration to the courts, reasoning that the process resolves cases with greater speed and reduced expense. Some consumer advocates prefer the courts because, in their view, the government’s judicial system provides private citizens and consumers with more options and is less likely to side with the companies being sued.
Lead petitioner Neal Bissonnette is one of several truckers who performed services for the respondent, Maine-based LePage Bakeries, which is owned by Flowers Foods Inc. Mr. Bissonnette and other drivers delivered baked goods such as Wonder Bread and Tastykake under distribution agreements with Flowers and its subsidiaries LePage and CK Sales Co.
The truckers claimed in a proposed class action lawsuit that Flowers incorrectly classified them as independent contractors when, in reality, they were employees entitled to extra protections under state and federal wage laws.
They claimed the company unlawfully took deductions from their wages, refused to pay overtime, and unjustly enriched itself by forcing them to pay for distribution rights and operating expenses. The company countered that their complaint should be thrown out or sent to compulsory arbitration under the FAA.
The drivers were responsible for hauling products to stores in Connecticut from a Flowers regional warehouse.
Flowers considered the drivers to be independent contractors and “required them to purchase the right to transport goods for the company” while compelling them to form their own corporations to do so. Flowers also required drivers to pay for their trucks, the drivers’ petition to the Supreme Court states.
“And while Flowers required the drivers to sign contracts purporting to deem them ‘independent’ distributors, their actual job was to transport Flowers’ goods under Flowers’ control. The company has never disputed that most of the plaintiffs’ work hours were, in fact, spent transporting goods,” the petition reads.
In 2019, the drivers filed their lawsuit, claiming that Flowers misclassified them as independent contractors. They were upset after the company decided that because they were independent contractors, it was free to “withdraw its own operating expenses from its drivers’ paychecks, charge them for the privilege of working for the company, and decline to pay them overtime, none of which, the [drivers] allege, is legal.”
Flowers tried to force the dispute into arbitration based on an arbitration clause in the distributor agreement drivers signed with the company. The drivers opposed this move, saying they were exempt from the FAA.
They argued that truck drivers who transport goods from one state to another or even from one point to another point in a single state had long been considered to be transportation workers “engaged in interstate commerce.” This means that their contracts of employment are exempt from the FAA, they said.
However, a federal district court disagreed, finding that even though they spent most of their working hours delivering goods, the drivers were not transportation workers because the Flowers contract deemed them to be independent businesses that carried out other tasks in addition to transportation.
A divided panel of the 2nd Circuit found in 2022 that the employees concerned were not eligible for the arbitration exemption in the FAA because Flowers Foods is “in the bakery industry, not the transportation industry.”
The full 2nd Circuit refused to rehear the case in February 2023. A circuit split was created three months later when the U.S. Court of Appeals for the 1st Circuit ruled that a different set of Flowers Foods drivers with a wage dispute were covered by the exemption.
Chief Justice Roberts wrote in the new Supreme Court opinion that “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by [Section] 1 of the Act.”
“The Second Circuit accordingly erred in compelling arbitration on the basis that petitioners work in the bakery industry,” the court stated, remanding the case to the circuit court “for further proceedings consistent with this opinion.”
The Supreme Court declined to express an opinion on any potential alternative grounds in favor of arbitration, including that “petitioners are not transportation workers and that petitioners are not ‘engaged in foreign or interstate commerce’ within the meaning of [Section] 1 because they deliver baked goods only in Connecticut.”
