Wednesday, March 22, 2023
Dr. Tamar Meshel is an Associate Professor at the University of Alberta Faculty of Law. She researches, teaches, and consults primarily in the areas of domestic and international arbitration and her work has been cited by the Supreme Court of Canada, the Supreme Court of Israel, and the Delaware Court of Chancery, as well as by numerous scholars.
Southwest Airlines v. Saxon Comes Full Circle
One of the most criticized aspects of the Federal Arbitration Act (FAA) (and there are plenty to choose from) is that it operates to “foreclose state legislative attempts to undercut the enforceability of arbitration agreements” (Southland Corp. v. Keating) by pre-empting any state law that “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” in enacting the FAA (AT&T Mobility LLC v. Concepcion). The conventional wisdom is that if it were left to the states, employees and consumers would not be subjected to the pre-dispute arbitration agreements that SCOTUS—through its interpretation of the FAA—is commonly accused of imposing on them.
In some states, however, the FAA may turn out to be less “pro-arbitration” than state law. Take Southwest Airlines Co. v. Saxon, one of the FAA cases SCOTUS decided in the 2021 Term. Considered a win for employees, the Court in Southwest Airlines unanimously held that airport cargo loaders were “transportation workers” exempt from arbitration under § 1 of the FAA. The Court refused to interpret § 1 of the FAA narrowly on the basis of its “proarbitration purpose,” which it has invoked numerous times in past decisions. As a result, the plaintiff could not be compelled to arbitrate her claims (including collective claims under the federal Fair Labor Standards Act) against Southwest and was permitted to pursue them in court.
Back before the district court in Illinois, however, the plaintiff was less successful in avoiding arbitration. On March 10, the district court granted Southwest’s renewed motion to compel arbitration, this time under the Illinois Uniform Arbitration Act (IUAA). Unlike the FAA, the IUAA does not exempt any category of employees from its coverage, although it allows courts to refuse to enforce arbitration agreements for failure to comply with the terms of the Illinois Workplace Transparency Act (WTA). Having no available exemption from arbitration under the IUAA, the plaintiff instead argued that she should nonetheless be allowed to proceed in court, because Southwest had waived the right to arbitrate, the arbitration agreement was substantively unconscionable, and it violated the WTA.
The district court was unconvinced. It found that Southwest did not waive its right to arbitrate under Illinois law, because it did not unreasonably delay requesting arbitration under the IUAA, did not request any decision on the merits, and no discovery was conducted. The court also rejected the plaintiff’s unconscionability arguments, which were based on provisions in the agreement that limited discovery and entitled Southwest to attorneys’ fees if an employee pursued a claim in court rather than in arbitration. Finally, the district court found that the WTA did not apply to the plaintiff’s case, because the act only prohibits arbitration of claims involving unlawful employment practices, defined as forms of “unlawful discrimination, harassment, or retaliation . . . actionable under Article 2 of the Illinois Human Rights Act, Title VII of the Civil Rights Act of 1964, or any other related State or federal rule or law.” The plaintiff’s claims, the court held, did not involve any such unlawful employment practices. The district court therefore granted Southwest’s motion to compel arbitration and stayed the case.
After spending four years litigating before three levels of federal court in order to avoid the FAA, the plaintiff in Southwest Airlines is now back where she started—in arbitration. Only this time, it is not the FAA that put her there. Some opponents of the FAA might be less bothered by this outcome because it is a function of state law rather than a domineering federal act. At the same time, many critics take issue not only with the FAA’s pre-emptive effect but also more fundamentally with arbitration of employment disputes. If this is indeed the real concern with the FAA, it should equally apply to state laws. Southwest Airlines therefore provides an interesting opportunity to elucidate what precisely is it in the FAA that critics oppose and to consider that some state legislatures have opted to enforce employment arbitration agreements even where the FAA does not mandate them to do so.