Workers have spent years arguing the Federal Arbitration Act’s transportation worker exemption means their wage-based claims against companies such as Amazon.com Inc., Domino’s Pizza, and Uber Technologies Inc. belong in open court, not behind closed doors.

A federal appellate court added a new obstacle in 2022 when it ruled that when it comes to the exemption, which company someone works for matters as much as what type of work they perform.

The US Supreme Court will hear arguments Tuesday over whether that FAA exemption is indeed limited to those whose employers are actually in the transportation industry. And no matter how the court rules in the fight between Flowers Foods Inc. and drivers who distribute its baked goods, lengthy court battles over the issue are only likely to increase, lawyers on both sides say.

Requiring a transportation-industry employer “will lead to years of litigation focusing on the proper characterization of economic activity for a business, not on what workers do,” said Barry Winograd, who filed an amicus brief in support of the workers on behalf of the National Academy of Arbitrators.

The arguments give the justices an opportunity to address and resolve a circuit split on the exemption—which applies to classes of workers engaged in foreign or interstate commerce—stemming from two recent wage-and-hour disputes involving Flowers Foods.

The high court regularly hears arbitration-related cases and last addressed the FAA’s transportation worker exemption in Southwest Airlines Co. v. Saxon in 2022. The justices continue to “fine-tune” this area of the law so as to “preserve arbitration as an efficient method of dispute resolution, which in turn serves an overburdened judiciary,” said Imre Szalai, a Loyola University New Orleans law professor who studies the act.

Arbitration has increasingly become a flashpoint in labor relations, as the rise of the gig economy has spawned an increase in employment classification and benefit-entitlement disputes. Employers favor arbitration’s non-public single-combat nature, while workers decry it for the same reasons, as well as its limited avenues for overturning an adverse ruling.

Some lower court judges have raised questions about whether mandatory arbitration remains efficient when fights over whether an exemption applies can last years. One district judge bemoaned the practice in a case that spent two and a half years in litigation—including a trip to the US Court of Appeals for the First Circuit—only to be sent to arbitration.

The justices “have to be aware of how long this is taking,” said Angelo I. Amador, executive director of the Restaurant Law Center. The exemption also affects workers at smaller businesses. The Covid-19 pandemic made delivery more important for restaurants, and in cities near state lines, that means transporting meals across borders, Amador said. His organization filed an amicus brief in support of Flowers Foods.

But adding a transportation-industry requirement could mean even longer court battles, with judges needing to “come up with their own tests” and potentially hold “evidentiary hearings for which parties would have to hire experts,” said Miriam Becker-Cohen, appellate counsel at the Constitutional Accountability Center.

Tastykake Truckers

Petitioners Neal Bissonnette and Tyler Wojnarowski deliver baked goods such as Wonder Bread and Tastykake under distribution agreements with Flowers Foods and subsidiaries Lepage Bakeries Park Street LLC, and CK Sales Co. Their proposed class action alleges Flowers Foods misclassified them as independent contractors when they’re really employees entitled to additional protections under state and federal wage laws.

A split Second Circuit panel in 2022 said the workers don’t qualify for the FAA carveout because Flowers Foods is “in the bakery industry, not a transportation industry.” The full Second Circuit declined to rehear the case in February 2023, setting up a circuit split three months later when the First Circuit—in a similar wage dispute involving another set of Flowers Foods drivers—rejected adding an industry requirement.

“Whether an employer has to be in the ‘transportation industry’ for the exemption to apply is fundamental to defining its scope,” said Tamar Meshel, a University of Alberta law professor. Leaving the split in place would result in “contradictory outcomes” for similar or even identical cases, she said, much like the situation that created it.

If the justices adopt the Second Circuit’s approach, “people who plainly do transportation work like the truck drivers here, oddly enough, will not count as transportation workers” for exemption purposes, said Becker-Cohen. Under an industry-based test, people at different companies “whose day-to-day work looks exactly the same could be classified differently,” she added. Her organization filed an amicus brief in support of the drivers.

The change could decrease litigation in some suits “where the employer is clearly not in the transportation industry,” said Meshel, who formerly practiced international commercial arbitration. But it “would likely give rise to a host of new questions,” such as what “transportation industry” means and “what kind of businesses it includes,” and workers within the industry would still have to show their actual work qualifies for the carveout, she said.

Backing the Bakery

“Large companies such as Amazon and Walmart have substantial interstate transportation components of their retail operations,” the National Academy of Arbitrators’ Winograd said. If the Supreme Court adopts the industry requirement, then businesses like these “could continue relying on the FAA to compel arbitration,” he added.

Amazon has faced its share of court challenges based on the FAA exemption and has a pending high court petition to overturn an appellate decision where workers successfully invoked the carveout. Amazon filed an amicus brief in support of Flowers Foods, and an attorney for the online retailer declined to comment further on the case.

Business industry groups also urged the high court to side with Flowers Foods. They argued that rejecting an industry requirement—not adding one—is what “would significantly increase litigation over when and whether the FAA applies,” according to a US Chamber of Commerce a brief filed jointly with the National Retail Federation and the American Bakers Association.

An attorney for the groups declined to comment.

Whatever the high court decides, its ruling “will hopefully minimize wasteful litigation,” Szalai said. “Wherever we draw the line for what is arbitrable and what is not,” he added, “that line should be clear.”

The case is Bissonnette v. LePage Bakeries Park St. LLC, U.S., No. 23-51, oral arguments 2/20/24.