• Paul Peter Nicolai

ARBITRATION EXEMPTION

Updated: May 10

An employee claimed her employer’s policy of not compensating merchandisers for an off-the-clock time deprived them of wages earned. The employer pointed to an arbitration clause and said the case had to be dismissed. The trial court refused, and the appeals court has upheld that decision. The case has to go to trial despite the arbitration clause.


The basis for the decision is that the employee’s work as a merchandiser is so closely related to interstate transportation as to be practically a part of it. As a result, it is inside the Federal Arbitration Act’s (FAA) interstate commerce exemption scope.


WHY THIS IS IMPORTANT… The FAA does not protect all arbitration agreements. There is an exemption for employment contracts for seamen, railroad employees, or any other classes of workers engaged in foreign or interstate commerce. Several courts have ruled that anything so closely related to interstate transportation as practically being part of it is exempted. It is essential to know whether the job being done falls into this category before you can expect the benefits of arbitrating disputes with employees in these jobs.

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