Once again, a court has considered the criteria for the transportation worker exemption from the Federal Arbitration Act (FAA), 9 U.S.C. § 1. This time an account manager for ISS Facility Services Inc., Heidi Eastus, who oversaw ticketing and gate agents at George Bush Intercontinental Airport in Houston, Texas, maintained that she was exempt from the FAA as a transportation worker. Eastus was assigned to supervise ticketing and gate agents for Lufthansa German Airlines, which sometimes entailed handling passengers’ luggage herself. But the Fifth Circuit panel found the FAA exemption did not apply. See Eastus v. ISS Facility Services, Inc., Case No. 19-20258 (5th Cir. May 27, 2020).

Eastus filed employment discrimination and retaliation claims against ISS and two Lufthansa entities. The defendants moved to compel arbitration premised on the arbitration provision in Eastus’ ISS employment agreement. Eastus responded that arbitration could not be ordered because she was exempt from the FAA. The district court granted the motion to compel arbitration. We have repeatedly addressed the uncertainty surrounding the tests for application of the FAA exemption. See our April 29, 2019, Sept. 13, 2019 and April 3, 2020 blog posts. As reflected in the discussion below, application of the correct test may involve analysis of complex and differing legislation. The ongoing search for proper exemption criteria has caused consternation in gig economy companies and may only be intensified by claims arising from the COVID-19 pandemic in the transportation industry.

The Fifth Circuit Analysis

The panel opinion, authored by Judge Leslie H. Southwick, began with the premise that the FAA’s Section 1 residual clause (“other class of workers engaged in foreign or interstate commerce”) should be read narrowly, citing Rojas v. TK Commc’ns., Inc., 87 F.3d 745, 748 (5th Cir. 1996). Indeed, the court found, the exemption should be applicable only to a “class of workers actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are.” Id. (Emphasis added.) And Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 113, 119 (2001), did not change the general principle that “engaged in … interstate commerce” was to be given a limited construction. Moreover, the Fifth Circuit had already taken the position that the Supreme Court’s interpretation in Circuit City was “fully consistent” with the Rojas opinion.

Key to the panel’s decision was whether the worker had to be engaged in the movement of goods in interstate commerce for the residual exemption to apply. Following Rojas, the panel found it was the applicable standard. See 87 F.3d at 748. Next, the court addressed (and dispensed with) Eastus’ arguments.

First, Eastus asserted that airline employees were closely related to rail workers since both were subject to the Railway Labor Act’s dispute resolution procedures. See 45 U.S.C. §§ 181-188. But the FAA did not specifically exclude airline employees, and similar dispute resolution procedures didn’t matter. The operative test was “the movement of goods in interstate commerce” like with seamen and rail workers.

Next, Eastus asserted that the district court misunderstood Circuit City as to the “movement of goods” requirement. Yet the panel found Circuit City’s use of the word “goods” was not determinative because that opinion did not overrule the Rojas standard.

Finally, the panel considered the dispositive question of Eastus’ involvement in the movement of goods. As a threshold matter, the court rejected the Eighth Circuit’s multifactor test as only adding “to the complexity of the analysis.” See Lenz v. Yellow Transp., 431 F. 3d 348, 352 (8th Cir. 2005). Focusing on Eastus’ role, the panel found that while airline passengers moved in interstate commerce, her job responsibilities “preceded that movement.”

Just as longshoremen and delivery-truck loaders were not transportation workers under Section 1 (as Eastus conceded), her responsibilities involved loading and unloading airplanes – not the airplane’s movement in interstate commerce. So, the FAA exception did not apply, and arbitration was proper.

The dispute over the FAA exemption is ongoing. Appeals involving the issue are pending before the First, Seventh and Ninth Circuits. See our April 3, 2020 blog article. Presumably, the U.S. Supreme Court ultimately will be called on to resolve the issue. Until then, more cases are likely to arise in the transportation industry, driven in part by disputes over the status of workers as contractors or employees and fueled by the COVID-19 pandemic.

Bottom Line:

The Fifth Circuit found that an airline supervisor who at most loaded and unloaded airplanes did not fall under the FAA exemption.