Vela v. Harbor Rail Services of California, Inc.
The Second District holds that a railcar repairman who inspects and repairs out-of-service freight cars in a rail yard is neither a “railroad employee” nor a “transportation worker” under the FAA section 1 exemption — so his arbitration agreement and class-action waiver are enforceable.
Vela v. Harbor Rail Services of California, Inc. (2026) ___ Cal.App.5th ___ [No. B344723]
Arbitration
FAA § 1 exemption
Wage & Hour
Affirmed
In brief. Arturo Vela worked as a freight-car repairman for Harbor Rail, which contracted with Pacific Harbor Line to inspect and repair railcars that had been taken out of service in a Wilmington rail yard. He brought a wage-and-hour class action and argued his arbitration agreement was exempt from the FAA as a transportation worker’s contract. The Court of Appeal disagreed and affirmed enforcement: Vela is not a “railroad employee” (Harbor is not a railroad and PHL’s contract was not his contract of employment), and he is not a “transportation worker,” because inspecting and repairing decommissioned freight cars “is too far removed from the actual process of transporting goods.” Because the FAA applies, his class-action waiver is enforceable. (Vela v. Harbor Rail Services of California, Inc. (2026) No. B344723 (slip opn. at pp. 2, 12–19).)
By Jonathan J. Delshad
Draft for review · source-verification pending
Facts and statutory framework
The FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” (9 U.S.C. § 1), the last category limited to “transportation workers.” (slip opn. at pp. 2, 11–12, citing Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109.) If the exemption applies, California law governs and Labor Code section 229 could keep wage claims in court and Gentry could void the class waiver; if the FAA applies, it preempts both. (slip opn. at pp. 1, 11.)
Harbor hired Vela as a rail-freight-car repairman in 2021 under a mutual arbitration agreement with a class-and-representative-action waiver. (slip opn. at pp. 2–3.) Harbor was “an independent contractor for Pacific Harbor Line” at PHL’s Wilmington train yard. (slip opn. at pp. 4–5.) Under that arrangement, PHL’s railroad customers (BNSF and UP) delivered freight cars to the yard, “disconnect[ed] their locomotives, and le[ft] the freight cars to sit … awaiting inspection/repairs”; at that point the cars “were withdrawn from service/decommissioned … [and] not useable until and unless they passed inspection.” (slip opn. at pp. 4–5.) Vela “change[d] trains’ wheels and brake pads, disassemble[d] and reassemble[d] train cars, and … weld[ed] and fabricate[d] metals,” following federal railroad regulations; he did not move, drive, or operate any trains or cars. (slip opn. at pp. 4–6.)
Procedural history
The trial court compelled Vela’s individual claims to arbitration and dismissed and struck his class claims. (slip opn. at p. 8.) On appeal, the order striking the class claims was appealable under the “death knell” doctrine (In re Baycol Cases I & II (2011) 51 Cal.4th 751), but the order compelling arbitration was not; following Nixon v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 934, the court treated the latter as a petition for writ of mandate. (slip opn. at pp. 8–10.) The opposing party “bear[s] the burden to demonstrate that the [section 1] exemption applies,” with factual findings reviewed for substantial evidence and the legal question de novo. (slip opn. at p. 10.) The court affirmed. (slip opn. at p. 19.)
Issue
Is a worker who inspects and repairs freight cars that have been taken out of service in a rail yard a “railroad employee” or a “transportation worker … engaged in … interstate commerce” exempt from the FAA under section 1 — such that California law would govern his arbitration agreement and class-action waiver? (slip opn. at pp. 11–12.)
Holding
Affirmed; Vela falls within neither prong of the exemption. (1) He is not a “railroad employee”: Harbor is not a railroad, and the contract between Harbor and PHL “cannot constitute a ‘contract of employment’ within the meaning of the section 1 exemption,” because Vela had no contract or service relationship with PHL. (slip opn. at pp. 12–14.) (2) He is not a “transportation worker”: under the Saxon two-step framework, “the actual work” of his class — “inspecting and repairing rail freight cars which had been temporarily taken out of service” — is “too far removed from the actual process of transporting goods to ‘play a direct and “necessary role in the free flow of goods” across borders.’” (slip opn. at pp. 14–16.) Because the FAA applies, the class-action waiver is enforceable and the class claims were properly stricken. (slip opn. at p. 19.)
Reasoning
1. The PHL contract is not Vela’s “contract of employment.” The court rejected Vela’s “railroad employee” theory, which rested on Harbor’s service contract with PHL. A section 1 “contract of employment” “must have a qualifying worker as one of the parties,” and a business-to-business services agreement is not one. (slip opn. at pp. 12–13, citing Fli-Lo Falcon, LLC v. Amazon.com, Inc. (9th Cir. 2024) 97 F.4th 1190, 1196–1197, and Amos v. Amazon Logistics, Inc. (4th Cir. 2023) 74 F.4th 591, 596.) New Prime Inc. v. Oliveira (2019) 586 U.S. 105 — which held a section 1 “contract of employment” covers independent contractors as well as employees — did not help, because nothing in it makes the Harbor-PHL contract Vela’s employment contract or makes Vela a railroad employee. (slip opn. at pp. 13–14.) Nor did Vela qualify as “in the service of” PHL under the Railway Labor Act, since PHL had no authority to supervise or direct his work. (slip opn. at p. 14.)
2. The Saxon framework focuses on actual work, not the employer’s industry. A transportation worker is one whose “relationship to the movement of goods [is] sufficiently close … that his work plays a tangible and meaningful role in their progress through the channels of interstate commerce.” (slip opn. at pp. 14–15, quoting Southwest Airlines Co. v. Saxon (2022) 596 U.S. 450, 455–458, and Ortiz v. Randstad Inhouse Services, LLC (9th Cir. 2024) 95 F.4th 1152, 1160.) A worker must “play some role in the actual transportation of goods.” (slip opn. at p. 15.)
3. Repairing out-of-service cars is too attenuated. Applying that test, the court held Vela’s class did not qualify: the cars he worked on had been “temporarily taken out of service and delivered to PHL’s yard for the purpose of inspection,” and “[i]t was only after Vela and his coworkers completed their tasks that the freight cars were returned to actual service and again were actively engaged in transportation.” (slip opn. at pp. 15–16.) The court analogized to Holley-Gallegly v. TA Operating, LLC (truck mechanic too attenuated) and noted there was “no evidence” the cars Vela serviced were “still carrying goods.” (slip opn. at pp. 16, 18.) It declined to follow the pre-Saxon eight-factor test of Western Dairy Transport, LLC v. Vasquez, whose “employer’s business” factors are “no longer relevant under Saxon,” which focuses on the employee’s “actual work.” (slip opn. at pp. 16–18, citing Bissonnette v. LePage Bakeries Park St., LLC (2024) 601 U.S. 246, 256.)
4. FAA applicability resolves the class-waiver question. Because Vela is not exempt, the FAA governs and preempts the California law that would otherwise render the class waiver unenforceable. (slip opn. at p. 19, citing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 359.) The trial court therefore properly dismissed and struck the class claims. (Ibid.)
Significance
Vela draws a meaningful line in the fast-developing FAA section 1 case law: a worker’s connection to interstate commerce must be to the actual transportation of goods, and maintenance or repair work on equipment that is out of service — “temporally and functionally separate from the actual movement of goods” — does not qualify. The decision pairs instructively with Doss v. Tesla, decided weeks later, where yard hostlers who positioned still-loaded, out-of-state trailers for unloading were exempt: the difference is that the trailers in Doss were in the live stream of an interstate delivery, while the freight cars in Vela had been pulled from service for repair. Vela also rejects the pre-Saxon multi-factor “transportation industry” tests, reinforcing that the inquiry is the employee’s actual work, not the employer’s line of business. For employers in logistics and rail, the decision preserves arbitration and class-waiver enforceability for repair, maintenance, and similar support roles; for employees, it underscores the need to tie the work to goods actually in transit.
Key quotes
“[T]he actual work that workers in Vela’s class typically carr[ied] out was inspecting and repairing rail freight cars which had been temporarily taken out of service … . This type of work is too far removed from the actual process of transporting goods to ‘play a direct and “necessary role in the free flow of goods” across borders.’” (Vela, supra, No. B344723 (slip opn. at pp. 15–16).)
“It was only after Vela and his coworkers completed their tasks that the freight cars were returned to actual service and again were actively engaged in transportation.” (Vela, supra, No. B344723 (slip opn. at p. 16).)
Practice pointer
To claim the FAA section 1 exemption for a maintenance, repair, or support worker, you must connect the “actual work” to goods in transit: develop evidence that the worker handled goods, or vehicles/containers carrying goods, while those goods were moving in the stream of interstate commerce — not after they were taken out of service. Vela shows that working on decommissioned equipment, or being employed by a company merely “substantially related to” the rail or logistics industry, is not enough after Saxon and Bissonnette; the pre-Saxon “transportation industry” factor tests will not carry the day. Contrast Doss v. Tesla, where the goods were still in their interstate trailers. Defense counsel should document that the equipment was out of service and that the worker played no role in actual transportation. Note also the procedural wrinkle: an order compelling arbitration is generally not appealable, but a simultaneous class dismissal is, via the death-knell doctrine, and the arbitration order may be reviewed by treating the appeal as a writ petition. (slip opn. at pp. 8–19.)
Open questions
The court rested on the absence of evidence that the freight cars Vela serviced “were still carrying goods,” leaving open whether a repairman who routinely works on loaded cars mid-journey might qualify. (slip opn. at p. 18.) It also did not decide whether the arbitration agreement was part of a “contract of employment,” because Vela’s failure on both the railroad-employee and transportation-worker prongs was dispositive. (slip opn. at p. 12, fn. 4.) And while the decision rejects Western Dairy’s factor test as inconsistent with Saxon, the precise boundary between covered “actual transportation” work and non-covered support work — particularly for hybrid roles — will continue to be litigated case by case. (slip opn. at pp. 15–18.)