Supreme Court Clarifies That “Last Mile” Transportation Workers Who Don’t Cross State Lines Can Nonetheless Be Exempt From The Federal Arbitration Act As Worker
Case Name and Number: Flowers Foods, Inc. v. Brock, No. 24-935
Introduction: Many companies rely on the Federal Arbitration Act’s protections of the enforceability of arbitration agreements, but the FAA contains an exclusion making the statute’s protections inapplicable to employment contracts of transportation workers engaged in interstate commerce. Today, the Supreme Court decided another in its series of cases defining what it means for a transportation worker to be engaged in interstate commerce. The Court unanimously declined to adopt a bright-line rule that would have required transportation workers to cross state lines (or interact with vehicles that do) to be excluded from the FAA’s arbitration protections.
Background: The Federal Arbitration Act (FAA) generally requires courts to enforce private arbitration agreements according to their terms. But the FAA’s residual clause provides that “nothing” in that law shall be used to compel arbitration in disputes involving the “contracts of employment” of any class of transportation workers “engaged in . . . interstate commerce.” 9 U.S.C. § 1. Flowers Foods, a commercial bakery with locations throughout the country, uses franchisees to distribute its products to particular markets. Brock is one such franchisee; he picks up Flowers Foods’s products from a warehouse in Colorado and delivers them to local stores within the State.
In 2022, Brock sued Flowers Foods in federal district court, alleging that the company had underpaid him. Flowers Foods moved to compel arbitration under the FAA based on an arbitration clause in its distribution agreement with Brock. The district court denied Flowers Foods’s motion, and the Tenth Circuit affirmed. The Tenth Circuit reasoned that Brock belongs to a class of workers engaged in interstate commerce—and therefore Flowers Foods could not invoke the FAA—even though Brock does not cross state lines, because his intrastate activity is a constituent part of the interstate journey taken by Flowers Foods’s baked goods as they move to retail stores around the country.
Issue: Whether the FAA’s protections for the enforceability of arbitration agreements apply to contracts with workers who locally deliver goods that travel in interstate commerce, but who themselves do not transport goods across state borders or interact with vehicles.
Court’s Holding: In a unanimous opinion authored by Justice Gorsuch, the Supreme Court held that the exclusion from the FAA’s protection of arbitration agreements in Section 1 of the statute, which applies to transportation workers engaged in interstate commerce, does not necessarily require workers to cross state lines or interact with vehicles that do. Instead, workers who transport goods on intrastate legs of interstate journeys can “sometimes” qualify for the exclusion.
The Court began by explaining its series of recent decisions interpreting Section 1’s exclusion of transportation workers “engaged in foreign or interstate commerce.” In New Prime, Inc. v. Oliveira, the Court held that Section 1’s reference to “contracts of employment” reaches independent contractors. 586 U.S. 105, 116 (2019). In Southwest Airlines Co. v. Saxon, the Court held that an airline worker who loaded and unloaded cargo qualified under Section 1 despite not flying planes or otherwise crossing state lines. 596 U.S. 450, 459 (2022). And in Bissonnette v. LePage Bakeries Park St., LLC, the Court held that a worker can fall within the Section 1 exclusion even if he or she is not part of the transportation industry, so long as his or her work plays a direct and necessary role in the free flow of goods across borders. 601 U.S. 246, 256 (2024).
In today’s decision, the Court concluded that nothing in Section 1’s terms “engage” and “interstate commerce” necessarily requires crossing state lines or interacting with vehicles that do. Instead, the Court reasoned, those terms mean that even a significant amount of intrastate activity can be encompassed within a larger interstate journey, and that workers engaged in such intrastate activity therefore can be “engaged in interstate commerce.”
To bolster its textual reading, the Court looked to cases interpreting the Commerce Clause before Congress enacted the FAA in 1925. It said that those cases supported the conclusion that intrastate portions of a larger interstate activity can be thought of as connected to interstate commerce. At the same time, the Court was careful to note that it was not suggesting that the scope of the Section 1 exclusion is coterminous with the broad scope of the Commerce Clause. And the Court reaffirmed its earlier holding in Saxon that the transportation worker must play a direct, necessary, and active role in moving goods across borders to qualify under Section 1.
The Court provided an example to explain its reasoning, involving three drivers used by a company to deliver “Krimpets”:
Driver 1 takes the Krimpets from Company B’s bakery right up to the border between States A and B. He then gets out of his truck, unloads pallets of Krimpets on his side of the border, and drives home. Driver 2 then picks up the Krimpets, drives ten feet across the border, puts the Krimpets down again, and heads off. Finally, Driver 3 picks up the Krimpets in State A and delivers them to Company A’s headquarters.
The Court stated that it “cannot be right” that only Driver 2 was engaged in interstate commerce because “[e]ach of the drivers played a direct, active, and necessary part.”
The Court declined to address other potential arguments why Brock may not qualify for the Section 1 exclusion.
For example, Flowers Foods said that its distribution agreement is with Brock’s independently operated company, so Brock was not subject to any employment contract at all, and therefore could not qualify for the exclusion. It also said that Brock orders, purchases, and takes title to the goods before selling them to any local stores. The Court noted that lower courts have found Section 1 inapplicable on such theories, and it did not disturb those holdings. The Court did not reach them here because, it said, Flowers Foods’ arguments before the Court had only “hint[ed] at” those reasons “in passing.”
Today’s decision is narrow. The Court rejected a bright-line rule that would limit the FAA exclusion to transportation workers who cross state lines or interact with vehicles that do so. “At least sometimes,” the Court stated, “a worker who transports goods on an intrastate leg of an interstate journey can qualify for [Section 1’s] exemption” on the theory that the worker’s activity is part of a continuous interstate journey.
Importantly, the Court did not suggest that purely intrastate activity—such as conducting local rideshare operations—can qualify as engaging in interstate commerce. Moreover, as explained above, the Court left in place other theories successfully advanced by employers in the lower courts that further limit Section 1’s reach, even to workers performing last-mile delivery.
Employers with interstate delivery operations should evaluate their current arbitration clauses to mitigate the effect of today’s decision. Those employers might, for instance, consider incorporating into their agreements language referencing state arbitration laws, but should recognize that such laws often may not include all of the protections provided by the FAA. And they might also consider revising their contracts to include severability provisions to ensure that even if federal or state law invalidates an arbitration clause, the overall contract would remain valid.
Read the opinion here.