Supreme Court Expands FAA Exemption To Local Delivery Drivers In Interstate Supply Chains

Key Takeaways:

• The Supreme Court unanimously held that workers who deliver goods entirely within a single state may still fall within the Federal Arbitration Act’s (“FAA”) exemption for workers engaged in interstate commerce if their deliveries form part of a broader interstate supply chain. 
• As a result, employers cannot compel these so-called “last mile” drivers to arbitrate their legal claims against the employer under the FAA. 
• Businesses that depend on local delivery networks, particularly in the gig economy, should reassess whether their arbitration agreements with these workers remain enforceable in light of the Flowers decision.

On May 28, 2026, the Supreme Court issued its decision in Flowers Foods, Inc. v. Brock, No. 24-935, holding that local delivery drivers can fall within the exemption under Section 1 of the FAA regardless of whether their work requires them to cross state lines. Section 1 of the FAA exempts the contracts of transportation workers engaged in foreign or interstate commerce from the FAA’s requirement that courts enforce arbitration agreements. As a result, employers cannot rely on arbitration agreements to keep claims asserted by these types of employees out of court and in private arbitration.

The plaintiff in the Flowers case worked as a franchisee distributor for a bakery foods company, picking up baked goods at a Colorado warehouse and delivering them to retail locations throughout the state. In performing this work, he never left Colorado. When the plaintiff sued the company in federal district court alleging that the company had underpaid him and other distributors in violation of various federal and state laws, the company moved to compel arbitration under its distribution agreement with the plaintiff. The district court refused, and the Tenth Circuit affirmed, reasoning that plaintiff’s deliveries were part of a continuous interstate journey even though he personally stayed within state borders. As a result, the plaintiff fell within the Section 1 exemption and could not be compelled to arbitrate his claims. The Supreme Court granted certiorari to settle whether a transportation worker must cross state lines to invoke the Section 1 exemption.

Writing for a unanimous Court, Justice Gorsuch framed the question against a line of recent decisions that have progressively broadened who counts as a transportation worker engaged in interstate commerce under Section 1. In New Prime, Inc. v. Oliveira (2019), the Court extended the exemption to independent contractors. In Southwest Airlines Co. v. Saxon (2022), it covered an airline cargo loader who never boarded a plane. And in Bissonnette v. LePage Bakeries (2024), the Court rejected a requirement that the worker be employed in the transportation industry at all, so long as the worker played a “direct and necessary role” in moving goods across borders.

Against that backdrop, the Court found no textual basis in the words “engaged in interstate commerce” for a rigid state-line-crossing test. Justice Gorsuch illustrated the point with a hypothetical involving three drivers, each handling a different leg of an interstate delivery. One drives to the border, one carries the goods ten feet across it, and one completes the journey on the other side. That only the middle driver would qualify under Flowers Foods’ proposed rule, the Court said, “cannot be right” when each played an equally direct role in the same continuous movement of goods.

The opinion is deliberately narrow in certain respects. First, the employer had suggested in its briefing that the plaintiff might not qualify for the exemption for additional reasons, including because his distribution agreement ran with his independently operated company rather than with him personally and because he purchased and took title to the goods before reselling them to stores. The Court declined to address these theories, noting that the employer had only alluded to them without squarely presenting them for decision. Second, the decision also does not suggest that all intrastate delivery work is exempt from the FAA. Workers engaged in purely local operations with no connection to an interstate supply chain do not qualify for the exemption.

This ruling carries real consequences for companies that rely on arbitration agreements with delivery workers, particularly those operating franchise, distributor, or gig-based models where workers handle the final leg of an interstate supply chain without crossing a state line. The decision is the fourth ruling in recent years expanding the scope of Section 1’s carve-out for transportation workers. Taken together, the trend is clear: the Court views the exemption as a meaningful limit on the FAA’s arbitration mandate, and companies should not assume that local work automatically keeps a delivery driver within the FAA’s protective umbrella. Employers should review their arbitration agreements with these types of employees to assess whether they are enforceable in light of the Flowers decision.