Supreme Court Affirms The Transportation Worker Exemption Can Apply To “Last-Mile” Drivers, Allowing Them To Bypass Arbitration Under The FAA

Seyfarth Synopsis: The U.S. Supreme Court has resolved a circuit split, holding “last mile” drivers transporting goods within a single state can, but do not necessarily, fall within the transportation worker exemption under section 1 of the Federal Arbitration Act. As a result, such workers may be allowed to bypass mandatory arbitration agreements governed by the FAA.

Flowers Foods, Inc. v. Brock stems from a proposed class action filed in 2022 by drivers for an independent distributor of Flowers Foods. The drivers alleged that Flowers Foods misclassified them as independent contractors and underpaid them. These drivers picked up baked goods that arrived from out-of-state which were kept in a local warehouse, and then transported them to retail stores along their intrastate route. They never crossed state lines and never interacted directly with vehicles that did.

Flowers Foods moved to compel arbitration pursuant to an arbitration provision contained in the parties’ distribution agreement. The district court denied the motion, and the Tenth Circuit followed suit, reasoning that the drivers fell within Section 1’s exemption because their intrastate deliveries “formed a constituent part of the … interstate journey” from Flowers’ out-of-state bakeries to their ultimate destinations, the retail stores. The fact that the drivers never crossed state lines or directly interacted with interstate vehicles was not dispositive.

Flowers petitioned for review, urging the Supreme Court to adopt a bright line rule—that a worker can never qualify for the exemption unless the worker personally crosses state lines or directly loads or unloads a vehicle that did.

In a unanimous decision, the Supreme Court refused to create such a rule and affirmed the Tenth Circuit ruling. The Court found that neither the text of Section 1 nor its prior decisions supported the bright-line rule advocated by Flowers. Nothing in the statute expressly requires a worker to cross state lines or interact directly with a vehicle that does. Instead, the relevant inquiry is whether the class of workers “play[s] a direct and necessary role in the free flow of goods across borders.”

The Court drew support from its 2022 decision in Southwest Airlines Co. v. Saxon, in which airline cargo loaders qualified for the exemption even though they neither flew planes nor crossed state lines themselves. According to the Court, the focus is not on whether workers personally traverse state boundaries, but rather on the role they play in the interstate journey of the goods.

The Court also examined definitions of the terms “engage” and “interstate commerce” at the time of the FAA’s enactment. The Court observed that those definitions likewise contained no requirement that an individual personally cross state lines or directly interact with a vehicle engaged in interstate travel. The Court also looked to historical case precedent to reinforce its conclusion. The Court cited various cases decided in the decades preceding the FAA’s enactment. While those cases arose under the Commerce Clause, the Court found them highly probative of what it meant to be “engaged in commerce between the States” when Congress enacted the FAA.

Notably, the Court emphasized that Flowers Foods had raised several alternative arguments as to why the drivers may not qualify for the exemption, but chose not to seek review of those issues. It is unknown whether the Court’s outcome would have been different had Flowers asked it to discuss the ramifications of these issues. For example, Flowers observed that the drivers worked pursuant to a distribution agreement rather than a traditional employment contract, an issue some lower courts have considered relevant to whether a “contract of employment” exists for purposes of Section 1. Flowers also noted that the distributor took title to the baked goods before selling them to local retailers, a fact that some lower courts have considered relevant when determining whether they remained part of a continuous interstate journey.

Because Flowers elected to focus exclusively on securing a bright-line rule requiring interstate travel or direct interaction with interstate vehicles, the Court declined to address the significance of those other issues Flowers raised in passing. In effect, Flowers placed all of its emphasis on a single argument, and the Court rejected it.

As a result, several important questions remain unresolved. The Court did not address whether Section 1 applies to a contract between two business entities or to workers operating under a distribution agreement, rather than a traditional employment contract. Nor did it decide whether taking title to goods before transporting them within a state – such as for couriers fulfilling take-out orders made within a state – creates a new and distinct intrastate transaction for the goods, outside the scope of Section 1.

The decision leaves open other broader questions concerning the outer boundaries of the transportation worker exemption. While the Court made clear that drivers may qualify even when they never cross state lines or directly interact with interstate vehicles, it remains unclear whether warehouse workers, retail employees, or other non-drivers who handle goods that previously traveled in interstate commerce may likewise fall within the exemption. As that issue was not before the Court, lower courts will continue to grapple with where the interstate journey ends, and which workers are sufficiently connected to it. These questions are already the subject of active litigation across the country, and will continue to be litigated until the Supreme Court agrees to weigh in once again.