Executive Summary: What employees qualify as “transportation workers” such that they are exempt from the Federal Arbitration Act (FAA)? The Second Circuit endeavored to answer that question on May 5, 2022, in an important case for employers. Bissonnette v. LePage Bakeries Park St., LLC (2d Cir. 2022). Although the decision included quite a bit of dictum (discussion not essential to the holding), the court ultimately concluded that deliverers of baked goods did not qualify for the transportation worker exemption, and the plaintiffs’ claims were subject to arbitration under the FAA.
The Case:
Plaintiffs filed a class action lawsuit in federal district court in Connecticut against Flowers Food, Inc. and two of its subsidiaries (collectively Flowers) for wage and hour violations. Flowers is the holding company of subsidiaries that produce breads, including Wonder Bread, and buns, rolls, and snack cakes in 47 bakeries. Subsidiaries of Flowers sell exclusive distribution rights for these baked goods within specific geographic areas. Independent distributors who purchase these distribution rights market, sell, and deliver Flowers baked goods.
Plaintiffs are two independent distributors of Flowers’ goods. Under a distribution agreement entered into by all the independent distributors, plaintiffs picked up the baked goods from various warehouses in Connecticut and then delivered them to stores and restaurants within their specified geographic territory. Plaintiffs’ role as independent distributors of Flowers’ goods was expansive: they “undertake to maximize sales; solicit new locations; stock shelves and rotate products; remove stale products; acquire delivery vehicles; maintain equipment and insurance; distribute Flowers’ advertising materials and develop their own (with prior approval by Flowers); retain legal and accounting services; and hire help.”
The question arose: does this render these independent distributors transportation workers exempt from the FAA? The district court held “no” and dismissed the case, granting the defendants’ motion to compel arbitration. In a sharply divided 2-1 decision, the Second Circuit affirmed.
The court briefly addressed an issue that the lower court had addressed but which was not dispositive. The Second Circuit declined to follow the district court’s analysis and wound up affirming on an alternative basis. The court wrote a disquisition on whether Connecticut state law applied even if the FAA also applied. The court reserved on that question, stating that it was easier and cleaner to decide the case strictly on FAA grounds. Although the court analyzed the thorny question of whether the FAA preempts states’ arbitration laws, the language analyzing this issue was not necessary to the resolution of the case and, thus, is not binding.
So, the court decided the case on a more straightforward basis: were these independent distributors “transportation workers” who were exempt under the FAA? The court, quite decisively, said no. Hewing to its sister circuits’ analyses on this point, namely the Fifth and Eleventh Circuits, the court held that the exemption for “transportation workers” was to be applied narrowly to encompass only workers involved in the transportation industry. The core of the court’s holding that “that an individual works in a transportation industry if the industry in which the individual works pegs its charges chiefly to the movement of goods or passengers, and the industry’s predominant source of commercial revenue is generated by that movement.”
And so, the court found that the plaintiffs and putative class worked in the bakery industry. The movement of the baked goods was merely incidental to the commerce at issue: “in breads, buns, rolls, and snack cakes--not transportation services.” Thus, the court found that the plaintiffs were not excluded from the FAA and affirmed, over a vigorous dissent, the order compelling arbitration of their claims.
Employers’ Bottom Line: The Second Circuit took a narrow view of “transportation workers” under the FAA. It always has, but it reaffirmed the narrow principle that workers whose task is to transport goods does not always render them—may not usually render them—“transportation workers” under the FAA. If the mere movement of goods is incidental to the core functions of a distributor, such as the plaintiffs in this case, the court will only denominate these workers “transportation workers” where their core function is to deliver goods and not to market and distribute products. This is a helpful result for employers, and this issue, which is heavily litigated among more classical “transportation workers” such as those who work for Amazon and other delivery companies like GrubHub and DoorDash, may ultimately reach the Supreme Court.
If you have any questions about this Alert, please contact the author, Jeff Shooman, counsel in our New York City and Berkeley Heights offices and member of our Transportation practice group at jshooman@fordharrison.com. Of course, you can also contact the FordHarrison attorney with whom you usually work.