The Federal Arbitration Act (FAA) supports the enforcement of arbitration agreements and seeks to offer a faster, cost-effective alternative to litigation, especially in commerce and employment disputes. A notable aspect of the FAA is the transportation worker exemption, which excludes "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" from the FAA's reach. Through the years, the interpretation of this exemption has evolved through legal debates and court decisions.

In the recent case of Adan Ortiz v. Randstad Inhouse Services LLC, et al.(2024), the United States Court of Appeals for the Ninth Circuit focused on whether Adan Ortiz, a temporary employee engaged in warehouse work, qualified for the FAA's transportation worker exemption, thus precluding his employment dispute from arbitration under the FAA.

Ortiz worked for Randstad, a staffing company, and was assigned to work at a California warehouse operated by GXO Logistics Supply Chain Inc. This warehouse, serving Adidas, received and prepared products for interstate and international distribution. Ortiz's job involved moving packages within the warehouse to facilitate their storage and preparation for further shipment.

In March 2022, Ortiz sued Randstad and GXO for violations of California labor law, despite an arbitration agreement in his employment contract. The district court sided with Ortiz, concluding that the FAA's transportation worker exemption applied, thus the arbitration agreement could not be enforced under the FAA.

On appeal, the Ninth Circuit upheld the district court's ruling, applying the Saxon v. Southwest Airlines Co. (2022) two-step analysis. The Saxon analysis approach begins by examining the specific duties of the worker, rather than the broader industry context. It must then be determined whether these duties entail directly facilitating the movement of goods across state or international borders, thus integrating the worker into the interstate or foreign commerce process.

Applying the first step, the Court reviewed Ortiz' job functions and agreed with the district court that Ortiz' responsibilities were solely related to warehouse operations. Applying the second step, the Court supported the district court's finding that Ortiz was part of a worker class essential for the continuous movement of goods across borders, being actively involved in their transportation. Consequently, Ortiz' role satisfied all the criteria established in Saxon to categorize him as a transportation worker exempt from arbitration under the FAA.

The Court then rejected Randstad and GXO's argument that only employees in the transportation industry could qualify for the exemption, affirming the district court's finding that the nature of Ortiz's work, not the industry of his employer, determined his eligibility for the exemption.

For both workers and employers, this decision clarifies the application of the FAA's transportation worker exemption to warehouse employees like Ortiz, who play a direct and necessary role in the interstate flow of goods, even if their work is localized and does not involve crossing state lines.