The Seventh Circuit recently issued an important decision authored by Judge Easterbrook regarding the transportation worker exemption of section 1 of the Federal Arbitration Act in connection with an employment dispute involving Amtrak. See Montoya v. National Railroad Passenger Corporation, No. 23-3085 (7th Cir. Oct. 3, 2024) (click here for a copy of the decision). This decision, which relies on a textualist approach, will likely cause confusion and conflicting decisions in lower courts and lead to illogical results.
If the section 1 exemption applies, the Federal Arbitration Act does not govern, and one can break down the section 1 exemption into 3 categories:
category 1: “seamen,”
category 2: “railroad employees,” or
category 3: “any other class of workers engaged in foreign or interstate commerce,” with this third category referred to sometimes as the “residual clause” in court opinions.
This exemption has been the subject of recent Supreme Court attention in the Saxon (2022) and Bissonette (2024) cases. (It is my opinion that the Supreme Court misconstrued the exemption in 2001 in the Circuit City case, and much litigation over the exemption today can be traced back to the Court’s earlier mistake in Circuit City.)
The plaintiff worker in the Seventh Circuit’s Montoya case held the title of “Superintendent of On-Board Services” at Amtrak, and briefing in the case describes this job as a “management-level position.” The Seventh Circuit’s decision also describes the plaintiff as working “one to two hours a day, three days a week” engaged in “loading and unloading cargo from trains,” and thus, her job was not “entirely” desk-bound. This scenario appears to be similar to the fact pattern addressed by the Supreme Court in Saxon, involving a worker for Southwest Airlines who served as a ramp supervisor. The supervisor in Saxon trained ramp agents and also engaged in loading and unloading cargo.
The Seventh Circuit’s Montoya decision recognized that under the approach of Saxon, the plaintiff worker could fall under the residual or third category of the exemption (the worker engaged in interstate commerce) because of her work loading and unloading cargo for Amtrak trains. The Seventh Circuit also recognized there is some “potential for a factual dispute” regarding the exact tasks performed by this worker. However, the precise tasks are not relevant to the section 1 analysis in this case because the worker clearly falls under the second category of the exemption: “Amtrak is a railroad, and Montoya was its employee.” That’s the end of the line, and the second category of the exemption for “railroad employees” automatically and literally applies for this worker.
The Seventh Circuit in Montoya treats the second category of the exemption differently than the first and third categories. According to the Seventh Circuit, the term “seamen” in the first category “refers to a set of related tasks,” but the second category for “railroad employees” involves a question of mere “status.” Thus, going forward, at least in the Seventh Circuit, an analysis of the exemption may sometimes involve a fact-intensive inquiry regarding the tasks performed by a worker (for categories one and three), while at other times the worker’s mere status (for category two) will cause the worker to fall under the exemption. I am obsessed with the history of the FAA and tracked down letters and files of its drafters from archival materials. I am confident the drafters of the statute in the 1920s did not intend the exemption to be interpreted in this manner; they had a different purpose in mind when drafting this exemption.
Consider an inhouse web designer who works for Amtrak, an inhouse web designer who works for Carnival Cruise, and an inhouse web designer who works for Southwest Airlines. Under the Seventh Circuit’s reasoning in Montoya, the Amtrak web designer would be exempt from the FAA because of mere status. Literally, Amtrak is a railroad, and the web designer is an employee. But the same web designer working for a cruise ship and an airline probably would not be exempt from the FAA if the worker’s tasks are entirely deskbound and limited to web design. This result is illogical and hard to justify, but the Seventh Circuit’s Montoya decision, with its reliance on textualism, leads to this result. This case reminds me of a recent book I recommend from retired Supreme Court Justice Stephen Breyer, Reading the Constitution: Why I Chose Pragmatism, Not Textualism (2024), where he makes a strong argument that judges should use a pragmatic approach when deciding cases, with textualism as one tool of interpretation, but together with additional tools or methods of analysis, such as consideration of purpose, values, and consequences.