Q. We would like to ask all of our employees to sign arbitration agreements. However, in light of the 2011 U.S. Supreme Court decision in AT&T Mobility v. Conception, we would like these arbitration agreements to contain class-action waivers. How should we handle this process, given that we are in the transportation industry?
A. Without going into the many class-action waiver issues currently being considered in a number of pending cases, there is one very basic and often overlooked issue affecting arbitration agreement: Section 1 of the Federal Arbitration Act (FAA) specifically provides that it does not apply to transportation workers.
The act’s “exceptions clause” specifically states, in part: “but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C. sec. 1) The U.S. Supreme Court in the 2001 case Circuit City Stores v. Adams interpreted that provision to be limited to all workers actually engaged in the movement of goods in interstate commerce.
This exception doesn’t make all arbitration agreements impermissible. It only makes the FAA inapplicable to such agreements.
That means that recent decisions finding that class-action waivers are enforceable under the FAA are no defense to arbitration agreements that cannot be subject to the provisions of the FAA. If arbitration agreements are included for transportation workers, as may be authorized under statutes such as the California Arbitration Act, an employer may find itself subject to class arbitration even though there is an otherwise enforceable class-action waiver in the agreement.
Again, this exception appears to be little-known among employers, including many in the transportation industry. It is, therefore, important to have an attorney review all arbitration agreements to make certain they do not fall within this exception for transportation workers.