Supreme Court Broadens Arbitration Exemption for Delivery Drivers

The U.S. Supreme Court on May 28 unanimously ruled that delivery drivers may qualify for the Federal Arbitration Act’s (FAA’s) transportation-worker exemption even if they never cross state lines themselves, a decision that could limit employers’ ability to enforce arbitration agreements in portions of the logistics and delivery economy.

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In Flowers Foods, Inc. v. Brock, the justices held that workers transporting goods during an intrastate leg of a broader interstate journey can still be considered workers “engaged in interstate commerce” under Section 1 of the FAA.

The case involved Angelo Brock, a Colorado distributor for Flowers Foods, the producer of packaged baked goods including Wonder Bread. Brock delivered products from a Colorado warehouse to local retail stores without leaving the state. After Brock filed wage-and-hour claims against the company, Flowers Foods sought to compel arbitration under a distribution agreement requiring disputes to be resolved privately.

The Supreme Court rejected the company’s argument that workers must either cross state lines or directly interact with vehicles that do in order to fall within the FAA exemption. Writing for the court, Justice Neil Gorsuch said the statute’s text does not support such a bright-line rule. The opinion emphasized that interstate commerce can include a “continuous journey” in which portions of transportation occur entirely within one state. 

“The individual does not have to physically cross state lines to be engaged in interstate commerce,” explained Keith Wilkes, an attorney with Hall Estill in Tulsa, Okla., “nor does the employee or contractor need to have direct contact with the mode of transportation (truck, vehicle, airplane) involved in transporting the goods across state lines.”

The ruling builds on several recent Supreme Court decisions interpreting the FAA’s transportation-worker exemption broadly. In earlier cases, the Court held that the exemption can apply to independent contractors and to workers outside the traditional transportation industry.

The Flowers Foods decision, however, directly addresses the increasingly important “last-mile” delivery sector — workers who complete the final stage of delivering goods that originated out of state. Federal appeals courts had split on whether such drivers qualified for the exemption when they operated entirely within a single state.

The Court stopped short of creating a blanket rule exempting all local delivery drivers from arbitration. Instead, the justices focused narrowly on rejecting Flowers Foods’ proposed test. The opinion noted that other factors may still matter in future cases, including whether a worker operates through an independent business entity or whether goods had already reached their intended destination before local delivery began.

Still, the decision is expected to have substantial implications for employers that rely on arbitration agreements with delivery drivers, logistics workers, and gig-economy contractors. “The ruling is a boon for millions of transportation industry employees and independent contractors,” Wilkes said. “While most companies favor private arbitration in wage and labor disputes with their employees or independent contractors, employees and independent contractors often prefer to remain in court.”

If more workers are found exempt from the FAA, employers could face an increase in wage-and-hour litigation, including class and collective actions that arbitration agreements often restrict. Businesses using franchise-distributor or contractor models may face heightened scrutiny over whether workers are sufficiently connected to interstate transportation.

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The ruling may particularly affect industries dependent on complex supply chains and local delivery networks, including food distribution, retail logistics, e-commerce, and app-based delivery services.

Employers should review arbitration agreements involving transportation and delivery workers and closely monitor how lower courts apply the Supreme Court’s latest guidance. The Court left open several unresolved questions that could generate additional litigation over the scope of the FAA exemption in the years ahead.