{"id":2022,"date":"2025-02-12T19:25:33","date_gmt":"2025-02-12T23:25:33","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=2022"},"modified":"2025-02-12T19:25:34","modified_gmt":"2025-02-12T23:25:34","slug":"the-federal-arbitration-act-turns-100","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2025\/02\/12\/the-federal-arbitration-act-turns-100\/","title":{"rendered":"The Federal Arbitration Act Turns 100"},"content":{"rendered":"
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By Eden E. Anderson, Rebecca S. Bjork, Jennifer A. Riley, and Gerald L. Maatman, Jr.<\/strong><\/p>\n\n\n\n

The Federal Arbitration Act (FAA) turns 100 years old today. <\/p>\n\n\n\n

In enacting the FAA on February 12, 1925, Congress eliminated the power of the states to require that claims be resolved in court when contracting parties instead agree to resolve their claims in arbitration.  The FAA\u2019s purpose was to reverse longstanding judicial hostility to arbitration agreements, and to place arbitration agreements on equal footing with other contracts under the law. <\/p>\n\n\n\n

As we celebrate the FAA\u2019s 100th birthday, we highlight three key areas in which the FAA\u2019s scope and application have come under scrutiny in recent years. <\/p>\n\n\n\n

The Scope Of The Transportation Worker Exemption Remains Unclear<\/u><\/strong><\/p>\n\n\n\n

The FAA does not apply to employment contracts of seamen, railroad employees, and workers engaged in foreign or interstate commerce.  The scope of this so-called transportation worker exemption has been a hotbed for litigation in recent years, with the U.S. Supreme Court addressing the issue in multiple decisions.  The high court\u2019s decisions in Southwest Airlines Co. v. Saxon<\/em>, 596 U.S. 450 (2022), Domino\u2019s Pizza, LLC v. Carmona, et al.,<\/em> 143 S. Ct. 361 (2022), and Bissonnette v. LePage Bakeries Park St., LLC, <\/em>61 U.S. 246 (2024), emphasized that the transportation worker exemption is to be narrowly construed and that, for the exemption to apply, a worker must play a direct and necessary role in the free flow of goods across borders.<\/p>\n\n\n\n

In the wake of these decisions, state and federal courts are now grappling with what that means and whether warehouse workers, last-mile delivery drivers, ride-hailing drivers, and fueling technicians meet the \u201cdirect and necessary role\u201d test.  While such classes of workers bear little resemblance to the seamen and railroad employees expressly excluded from the FAA\u2019s scope, in jurisdictions hostile to arbitration, including California courts and the Ninth Circuit, the transportation worker exemption has been found to apply.  It is therefore important for employers to include language in arbitration agreements that permits alternative enforcement of the agreement under state law if the FAA is found not to apply. <\/p>\n\n\n\n

Does EFASHA Exempt Entire Cases From Arbitration?<\/u><\/strong><\/p>\n\n\n\n

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASHA).  Under the EFASHA, an employee alleging sexual harassment or assault, whether individually or as a class representative, may pursue their claims in court rather than in arbitration, regardless of whether they agreed with their employer to arbitrate their claims.<\/p>\n\n\n\n

But what happens when a plaintiff alleges such claims, but also alleges claims that permissibly can be arbitrated?  Courts too have begun answering that question.  Some courts have concluded that the EFASHA\u2019s statutory language requires that the employee\u2019s entire case remain in court, reasoning that the EFASHA makes a pre-dispute arbitration agreement invalid and unenforceable \u201cwith respect to a case<\/em>\u201d which means the entire case.  (9 U.S.C. \u00a7 402(a) (emphasis added).)  The court so concluded in Johnson v. Everyrealm, Inc.,<\/em> 657 F. Supp. 3d 535 (S.D.N.Y. 2023), in denying the employer\u2019s motion to compel the plaintiff\u2019s sex harassment, race discrimination, and retaliation claims to arbitration. <\/p>\n\n\n\n

The outcome, however, differed in Mera v. SA Hosp. Grp., LLC<\/em>, 675 F. Supp. 3d 442 (S.D.N.Y. 2023), wherein the plaintiff alleged claims that he experienced a hostile work environment on account of his sexual orientation and that he and other employees suffered state and federal wage and hour infractions.  The court there determined that, because the wage and hour claims did not \u201crelate to\u201d the hostile work environment claim, the wage and hour claims could be compelled to arbitration.  Id<\/em>. at 447.<\/p>\n\n\n\n

If a plaintiff can allege a plausible claim that triggers the EFASHA\u2019s application, they may be successful in keeping all their claims in court, or possibly only some of them. <\/p>\n\n\n\n

We anticipate continued litigation in this area, and an uptick in the assertion of tenuous sex-based harassment claims that might not otherwise have been plead. <\/p>\n\n\n\n

Appellate Issues Raised By Recent Case And Legislative Developments<\/u><\/strong><\/p>\n\n\n\n

What happens to the trial court proceedings after a decision on a motion to compel arbitration has also been a hotly litigated issue. <\/p>\n\n\n\n

In Smith v. Spizzirri<\/em>, 601 U.S. 472 (2024), the U.S. Supreme Court held that, when a federal court finds that a dispute is subject to arbitration and a party has requested a stay of the court proceeding pending arbitration, the FAA compels the court to stay, and to not dismiss, the proceeding.  Consequently, if a plaintiff\u2019s claims are compelled to arbitration and the district court proceedings stayed, there will be no judgment with an associated right to appeal.  Thus, the plaintiff\u2019s only recourse\u2014if they dispute the arbitration ruling\u2014will be to seek permission to pursue an interlocutory appeal or to pursue an appeal of the forum issue long after the fact if and when they lose in arbitration. <\/p>\n\n\n\n

Another stay issue that will surely be litigated concerns a 2024 amendment to California\u2019s Code of Civil Procedure.  In California, if a motion to compel arbitration is denied and that decision is appealed, there is now no longer an automatic stay of the court proceedings during the pendency of an appeal.  As a result, plaintiffs can seemingly proceed with their claims in court while the employer seeks a reversal of the forum issue on appeal, unless the appellant seeks and obtains a stay from the trial court.  As this law on its face disfavors arbitrate, we anticipate it will be challenged. <\/p>\n\n\n\n

For a more comprehensive summary of FAA-related litigation issues, Duane Morris\u2019s 2025 Wage & Hour Class and Collective Action Review, available here<\/a>, features an entire Chapter on this topic.\u00a0 \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eden E. Anderson, Rebecca S. Bjork, Jennifer A. Riley, and Gerald L. Maatman, Jr. The Federal Arbitration Act (FAA) turns 100 years old today.  In enacting the FAA on February 12, 1925, Congress eliminated the power of the states to require that claims be resolved in court when contracting parties instead agree to resolve … <\/p>\n

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