Supreme Court Clarifies That Last-Mile Delivery Drivers May Be Exempt From Arbitration Under the FAA

Employers that rely on arbitration agreements for delivery and logistics workers may face increased challenges enforcing those agreements following a recent U.S. Supreme Court decision clarifying the scope of the Federal Arbitration Act’s (“FAA”) transportation-worker exemption.  In a unanimous decision, the Court held that workers who complete the final, in-state leg of an interstate delivery route may still qualify for the exemption even if they never cross state lines themselves.  The decision serves as an important reminder that the enforceability of arbitration agreements for transportation-related workers often depends not on where the worker travels, but on the worker’s role in the movement of goods through interstate commerce.

Supreme Court Clarifies the Transportation-Worker Exemption

While the FAA generally favors enforcement of arbitration agreements, Section 1 of the statute exempts certain transportation workers engaged in interstate commerce from the FAA’s coverage.  As a result, workers who fall within the exemption cannot be compelled to arbitrate under the FAA, even where an arbitration agreement exists.

In Flowers Foods, Inc. v. Brock, the Supreme Court addressed whether “last-mile” delivery drivers, workers who transport goods locally after they arrive in a state, may fall within the exemption.  The case involved drivers who delivered baked goods from in-state distribution facilities to local retailers.  Although the drivers completed only intrastate deliveries, the products they transported had moved through interstate channels before arriving at the local warehouse.

The employer argued the exemption should not apply because the drivers themselves did not transport goods across state lines.  The Court rejected that argument, concluding that the relevant inquiry is whether the worker’s transportation activities are part of the broader interstate movement of goods.  Because the drivers completed the final leg of an interstate distribution chain, the Court held they could qualify for the FAA exemption.

Importantly, the Court stopped short of adopting a categorical rule that all local delivery drivers are exempt from the FAA.  Instead, whether a worker qualifies will remain a fact-intensive inquiry focused on the worker’s role in the practical movement of goods through interstate commerce.

Why This Matters for Employers

The decision may make it more difficult for employers to enforce arbitration agreements under the FAA for certain delivery, logistics, warehousing, and supply-chain workers even when those workers operate exclusively within a single state.  In particular, employers should not assume the FAA applies simply because workers do not personally cross state lines.  Courts are likely to examine whether the worker’s responsibilities form part of a continuous interstate stream of commerce, including final-mile or distribution activities occurring after goods enter a state.

The ruling may also prompt additional litigation over which workers qualify for the exemption, particularly in industries that rely heavily on local delivery models, independent contractors, or franchise-based arrangements.

Employer Considerations Going Forward

In light of the decision, employers should consider:

• Reviewing arbitration agreements applicable to delivery, transportation, and logistics personnel;
• Evaluating whether certain workers may be susceptible to FAA exemption arguments based on their role in transporting goods in interstate commerce;
• Determining whether applicable state arbitration laws may provide an alternative basis for enforcement where the FAA does not apply; and
• Revisiting dispute resolution strategies for workforces engaged in local distribution or final-mile delivery operations.

Key Takeaway

The Supreme Court’s decision reinforces that transportation workers need not personally cross state lines to fall within the FAA’s exemption.  For employers with arbitration programs involving delivery or logistics workers, now may be an appropriate time to revisit arbitration agreements and evaluate whether additional protections or alternative enforcement mechanisms should be considered.  For assistance, please contact one of Honigman’s Labor and Employment attorneys here.