The U.S. Supreme Court is set to clarify the scope of the "transportation workers exemption" to the Federal Arbitration Act (FAA), a decision that could have broad implications for many businesses, including those in the gig economy.
The case, Flowers Foods Inc. v. Brock, will determine whether local delivery drivers who handle goods which previously crossed state lines are exempt from mandatory arbitration.
Under the FAA, employment contracts typically require binding arbitration. However, Section 1 of the act exempts "seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."
In 2024, the Supreme Court ruled in Bissonnette v. LePage Bakeries Park St. LLC that this exemption is based on the work an employee performs, not their employer's industry. This left a critical question unanswered: Does the exemption apply to workers who operate only locally, like last-mile delivery drivers, but handle goods that have moved through interstate commerce?
The case now before the Supreme Court involves Angelo Brock, a distributor for Flowers Foods, who delivered products from a Colorado warehouse to customers within Colorado. He never crossed state lines himself. Brock filed a class-action lawsuit alleging misclassification as an independent contractor, and Flowers Foods moved to compel arbitration.
A federal district court and the 10th U.S. Circuit Court of Appeals both sided with Brock, ruling that he was engaged in interstate commerce because he was part of the final leg of an interstate delivery journey. The Supreme Court will now review this decision.
The outcome of this case could significantly impact any company that employs delivery drivers and uses arbitration agreements. According to Michael Twomey, an attorney with Dykema in Houston, the ruling could have greater ramifications than the Bissonnette decision.
The exemption applies to independent contractors as well as employees, so the decision will directly affect gig workers. If the Supreme Court broadens the exemption, it could invalidate arbitration agreements for a large class of delivery workers.
However, Twomey predicted the court will rule that a direct connection to the flow of goods across state lines is necessary for the exemption to apply.
The upcoming Supreme Court arbitration case is not the only recent compliance news. Here are other legal trends and events worth following.
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