Ninth Circuit Finds Shipping Warehouse Employee Qualified As Exempt "Transportation Worker" Under The Federal Arbitration Act

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On March 12, 2024, the Ninth Circuit published a decision in Ortiz v. Randstad Inhouse Services, LLC, holding that the Plaintiff Adan Ortiz...
United States Litigation, Mediation & Arbitration
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On March 12, 2024, the Ninth Circuit published a decision in Ortiz v. Randstad Inhouse Services, LLC, holding that the Plaintiff Adan Ortiz ("Plaintiff") qualified as a "transportation worker" under the Federal Arbitration Act, and was thus exempted from mandatory arbitration under the FAA. The district court rejected the employer's arguments that Plaintiff was bound by the arbitration mandate under the FAA because he performed duties on a purely local basis. This case continues to establish that the scope of the "transportation worker" exemption under the FAA is broader than only those workers that physically move goods or people across state lines, such as truck drivers and cargo pilots.

Randstad, a temporary staffing company, hired Ortiz on several occasions, during one of which he worked in a California warehouse facility operated by GXO Logistics Supply Chain, Inc. The warehouse received international shipments for Adidas, stored those goods, and prepared them for distribution across state lines. GXO does not move Adidas products to or from its warehouse, and Ortiz's job duties included exclusively warehouse work such as transporting goods to warehouse racks and assisting in preparing packages for shipment. Neither Ortiz, nor any of GXO's employees, were responsible for unloading goods arriving at the warehouse nor loading those scheduled for departure. Ortiz filed a class action in California state court against Randstad and GXO in March 2022, alleging various violations of California labor law, all of which were covered by the terms of the arbitration agreement he signed with Randstad. Randstad timely removed the case to federal court and filed a motion to compel arbitration, which GXO joined. Ortiz resisted enforceability of the arbitration agreement on the basis that he was exempt from arbitration under Section 1 of the FAA, as a "transportation worker."

The district court ruled that Ortiz was exempt from the FAA as a transportation worker, a class of worker "engaged in foreign or interstate commerce," because his employment involved the movement of goods across borders, even if his own job duties were localized at the warehouse. To reach this conclusion, the district court's analysis followed the two-step process established in Saxon v. Southwest Airlines Co., discussed in a prior blog. In applying that two-step analysis, the district court rejected Randstad's arguments that Ortiz was bound by the arbitration mandate under the FAA because he performed duties on a purely local basis, finding that Ortiz played a direct and necessarily role in the free flow of goods across borders.

The Ninth Circuit affirmed under the Saxon framework, in which the first step is to define the relevant "class of workers" to which the employee belongs, and the second step is to determine whether that class of workers is "engaged in foreign or interstate commerce." In so doing, the Ninth Circuit found that the district court had correctly first considered Ortiz's job duties (by reference to his job description), which included transporting packages to and from storage racks, helping other employees in obtaining packages, and assisting the Outflow Department in preparing packages for shipment. Thus, the district court correctly defined Ortiz's "class of workers" as exclusively warehouse work.

As to Saxon's second step, the Ninth Circuit found the district court correctly concluded Ortiz's "class of workers" played a direct and necessary role in the free flow of goods across borders, and actively engaged in transportation of such goods. Ortiz was "actively engaged" and "intimately involved with" transportation of such goods. Ortiz handled goods from entering the warehouse, to storage and leaving the warehouse, which were necessary steps in their ongoing interstate journey to their final destination. In other words, Ortiz handled Adidas products near the heart of their supply chain and played a necessary part in facilitating their continued movement. Ortiz clarifies that what matters under the Saxon analysis is the interstate flow of the goods, and the worker's function in the movement of such goods, and so an employee is not categorically excluded from the "transportation worker" exemption when he performs duties on a purely local level. Stated differently, it is not the distance the worker moves the goods but that the worker is essential in moving the goods in their interstate journey. As such, the Ninth Circuit affirmed the district court's order denying the employers' motion to compel arbitration.

As Saxon and Ortiz make clear, the "transportation worker" exemption under the FAA more broadly covers the "class of workers engaged in foreign or interstate commerce" to include exclusively local employees whose functions are essential in the movement of goods across state or international lines. Of note, however, Ortiz also made clear that not every connection to commerce will suffice and some job descriptions may reflect workers are further removed from physically handing the goods than Ortiz. In the end, the analysis is, as always, performed on a case-by-case basis.

Moving forward, employers with arbitration agreements – especially those who ship or assist in the shipping of goods or people across state or international lines – should critically analyze each employee's (or class of employees') job duties to determine whether a Section 1 exemption might apply under the FAA. Further, employers should follow updates carefully when seeking to enforce arbitration agreements with this class of "transportation workers."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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