Associate Justice Neil Gorsuch, United States Supreme Court at the Ninth Circuit Court of Appeals Conference in San Francisco

The Supreme Court has long extended the 1925 Federal Arbitration Act (FAA) nearly to the limits of congressional power to regulate interstate commerce. It has imposed the FAA’s preemptive coverage on all private employees except for transportation workers who, it admits, are statutorily excluded. It has stricken state laws and court decisions that it says particularly burden arbitration. The Supreme Court treats “click accept” as a knowing waiver of rights. Compulsory arbitration and class action bars are prevalent in non-negotiable employment contracts. But a recent win for truck drivers in the U.S. Supreme Court suggests new possibilities for access to the courts.

The recent New Prime v. Oliveira was a unanimous (8-0) decision that surprised many. Although the driver’s class action was seemingly within the “transport workers” exclusion from the FAA, and therefore the FAA’s requirement that arbitration clauses be enforced did not apply, the employer claimed that the driver was an independent contractor, so his work was not “employment.” Under the employer’s reading, the exclusion from FAA coverage would not apply and federal law would require the driver to arbitrate his claim regardless of state law. Justice Gorsuch dug into contemporary dictionaries in a Scalian search for original ordinary meaning. He concluded that when Congress enacted the FAA in 1925, the term “contracts of employment” referred to all agreements to perform work. “No less than those who came before him, Mr. Oliveira is entitled to the benefit of the same understanding today.” Consequently, the driver was not barred by the FAA and could litigate his putative class action Fair Labor Standards Act claim.

It is possible that this recent decision may have even broader implications for employees with boiler-plate arbitration clauses in their contracts. The FAA excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (the transport workers exclusion). But the high court in Circuit City Stores v. Adams (2001) ruled that only transportation workers were excluded from the FAA’s mandate that arbitration clauses be enforced. Writing for a bare majority, Justice Kennedy narrowly construed the exclusion—limiting it to transportation workers. He relied on the dubious, judge-made canon or maxim of statutory interpretation ejusdem generis (roughly: a broad residual phrase should be limited by the specific characteristics of the words preceding it). Consequently he concluded that the statute’s residual phrase “or any other class of workers” had to be limited to the specific characteristics of “seamen and railroad employees.” Further, he asserted that this was an “immediate and … insurmountable TEXTUAL obstacle” to reading “or any other class of workers” according to its ordinary meaning—a less dubious, albeit judge-made, approach. He therefore purported to transform a questionable judicial approach to reading statutes, which competes with the more accepted “ordinary meaning” canon, into what he characterized as a plain-meaning, textual approach. He also rejected clear legislative history. Lauding the “advantages of the arbitration process” the court enjoined a state employment discrimination action, compelling arbitration as required by the retailer’s contract of employment.

Gorsuch’s embrace of the 1925 “original meaning” of the FAA now casts doubt on Circuit City’s application of the FAA to all but transportation workers. The dissenters in that case understood the exclusion to extend to all contracts of employment in interstate commerce. Justices John Paul Stephens and David Souter, in separate opinions, relied on the FAA’s legislative history. Congress, at the urging of the ABA, was eager to end judicial resistance to commercial arbitration agreements. Commerce Secretary Hebert Hoover suggested an amendment excluding contracts of employment to address labor union (primarily maritime unions) opposition. This became the transport workers exclusion. Justice Souter even suggested an alternative canon to interpret the residual clause “any other class of workers …”: ex abundanti cautela (abundance of caution). We know that judges often choose between seeming opposite-pointing canons of statutory interpretation.

Embrace of this original meaning of the FAA (together with a rejection of the artificial, canon-based approach) could raise doubt about the Circuit City holding and make it possible for courts and legislatures to lift from workers in all industries in interstate commerce the burden of “take it or leave it” arbitration clauses.