Key Takeaways

• The Court continues to broaden what “engaged in interstate commerce” means for the Transportation Worker Exemption.
• “Last-mile” delivery drivers can fall within the Transportation Worker Exemption when their work forms part of a continuous interstate transportation journey, even if they never cross state lines or interact with a vehicle that does. 
• When assessing whether the FAA exemption applies, employers should focus on the worker’s role in the continuous interstate transportation journey, not whether a worker ever crosses state lines.
• Plaintiffs are likely to invoke the exemption more often, especially in the delivery area.
• The Transportation Worker Exemption’s reach remains unsettled about whether it covers driver-owned distribution companies and drivers who take ownership of goods before selling them locally.

Background

The Federal Arbitration Act (“FAA”) requires courts to enforce arbitration agreements that derive their authority from it. However, the FAA exempts certain contracts from its reach:  “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”¹ The final clause (often called the “Transportation Worker Exemption”) has received recent attention from the courts.

Over the years, the Supreme Court has repeatedly rejected narrow readings of the Transportation Worker Exemption. The Court has held that the exemption may apply to contracts with independent contractors,²  workers who load and unload cargo from interstate aircraft without crossing state lines themselves,³  and workers whose duties play a direct and necessary role in the free flow of goods across borders, regardless of whether their employer is in the transportation industry.⁴

In its recent decision in Flowers Foods, Inc. v. Brock, the Supreme Court further broadened the potential reach of the Transportation Worker  Exemption holding that at least sometimes, a person can take part, be employed, or be involved in that continuous journey without leaving a State or touching vehicles that do.⁵

Flowers Foods (“Flowers”) is a national supplier of baked goods that depends on franchisees to distribute to geographical areas. Angelo Brock signed a “Distribution Agreement” with Flowers to deliver goods to stores in the Denver area, which included a mandatory Arbitration Agreement controlled by the FAA. Brock picked up the goods from a Colorado warehouse and delivered the goods entirely within the state of Colorado. While Brock never crossed state lines, the goods he delivered had traveled interstate and had not yet reached their intended retail destinations.

When Brock sued Flowers in 2022, Flowers moved to compel arbitration. The district court denied the motion and Tenth Circuit affirmed, reasoning that Brock fell within the FAA’s Transportation Worker Exemption.

Flowers petitioned to the Supreme Court, asking the Court to answer the question of whether last-mile delivery drivers, who never cross state lines or interact with vehicles that do, are workers “engaged in … interstate commerce” for purposes of FAA exemption.

In a unanimous decision, the Court held that a worker who transports goods on an entirely intrastate leg of an interstate journey can fall within the Transportation Worker Exemption even if the worker never crosses state lines and never interacts with a vehicle that does.

What was the Court’s reasoning in Flowers?

The Court’s reasoning focused on whether Brock’s work was part of a continuous interstate transportation journey. The Court rejected Flowers’ proposed bright-line rule that a worker can qualify for the exemption only by crossing state lines or interacting with a vehicle that does. In the Court’s view, interstate commerce may include intrastate segments of a continuous journey between states. Because Brock allegedly completed the last leg of Flowers’ interstate distribution process by delivering goods to their intended retail destinations, the Court concluded he could fall within the FAA’s Transportation Worker Exemption.

The Court’s statutory interpretation focused on the FAA’s language of “workers engaged in… interstate commerce.” At the time the FAA was enacted, “engage” meant to take part in something or to be “employed” or “involved” in something. In Southwest Airlines Co. v. Saxon, the Court interpreted “engaged in” to mean one who plays a direct, necessary, and active role in movement of goods across borders.⁶ “Interstate commerce” meant traffic or transportation of goods between states. The Court reasoned that goods on a continuous journey from one state to another may be within the borders of a single state for much of the journey, but nevertheless the goods are still transported from a point in one state to a point in another state. Based on these interpretations, the Court held that there is nothing that requires someone to cross state lines, or interact with a vehicle that does, for them to be engaged in interstate commerce. Rather, one need only play a direct and necessary role in the overall continuous chain of the transportation of goods from one state to another.

Therefore, while Brock never crossed state lines and his vehicle remained in-state, he was still engaged in interstate commerce for purposes of the Transportation Worker Exemption because he played a direct role in the continuous movement of Flowers’ goods across state borders and into local Colorado stores when he completed the last leg of the journey. The Court’s reasoning focused on how the stream of commerce does not end when the goods are at the warehouse, it ends when Brock completed the deliveries. If it were not for Brock’s leg of the journey, Flowers goods would not have been distributed locally.

The Court also looked to prior cases that interpreted the meaning of “interstate commerce.” Most of the cases the Court relied on interpreted the Constitution’s Commerce Clause, not the FAA. Nevertheless, the Court reasoned that these cases involved the same language used in the FAA’s exemption, or similar formulations, and thus offer probative evidence of legislative intent at the time the FAA was enacted.

One such case was The Daniel Ball, where the Court held that a steamer transporting goods entirely within Michigan’s state limits was still engaged in commerce between the states because it was transporting goods that were destined for other states.⁷ Another case the Court relied on was Rearick v. Pennsylvania, where the Court held that a salesman picking up goods in-state, that originated out-of-state, and delivering those goods to their final destination was engaged in interstate commerce.⁸

How does the Flowers holding impact employers?

Employers cannot rely on the fact that their transportation workers, delivery drivers, or distributors operate solely on intrastate routes to secure enforcement of arbitration agreements under the FAA. Even purely intrastate delivery drivers may fall within the exemption when their work is part of the continuous interstate flow of goods.

Because the FAA may not apply to these workers, employers may lose the ability to enforce class action waivers tied to FAA-governed arbitration agreements, increasing vulnerability to class and representative actions.

For California employers, the decision makes FAA-only arbitration agreements riskier for workers involved in delivery, distribution, logistics, or similar functions. If the FAA does not apply, an employer may need to rely on the California Arbitration Act or another applicable state arbitration law. But that is not a complete substitute for the FAA. In California, when the FAA does not apply, courts have applied California public-policy and unconscionability principles to refuse enforcement of class waivers in transportation-worker cases. Employers should therefore review not only whether their agreements contain a state-law fallback, but also whether their class, collective, and representative-action waivers remain enforceable without FAA preemption, and whether any representative-action provisions require separate review under California law.

Employers should review and, if necessary, revise their arbitration agreements and delivery models. Employers should focus on whether the worker’s duties are part of a continuous interstate transportation journey to the goods’ intended destination, rather than relying on job titles, employer industry, or whether the worker personally crosses state lines.

The question remains open, though, whether the FAA exemption covers distribution agreements with drivers who independently own their companies. The Court also did not answer whether the FAA exemption extends to delivery drivers or distributors who take ownership of the goods before selling them to local stores.

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¹9 U.S.C. § 1

²New Prime Inc. v. Oliveira, 586 U.S. 105, 116 (2019).

³ Southwest Airlines Co. v. Saxon, 596 U.S. 450, 459, 461 (2022).

⁴Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246, 256 (2024).

⁵Flowers Foods, Inc. v. Brock, 608 U.S. __ (2026).

⁶Southwest Airlines Co. v. Saxon, 596 U.S. 450, 458 (2022).

⁷The Daniel Ball, 77 U.S (10 Wall.) 557, 565 (1870).

⁸Rearick v. Pennsylvania, 203 U.S. 507, 510-513 (1906.)

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Huda Alazani, of Hanson Bridgett’s 2026 1L LCLD Summer Associate program, contributed to this article.