The Federal Arbitration Act (FAA) exempts transportation workers from arbitration agreements when they are "engaged in foreign or interstate commerce." But does "engaged in interstate commerce" cover drivers who never cross state lines? In Flowers Foods, Inc. v. Brock, the Supreme Court affirmed that it does. Intrastate drivers ("last mile" drivers) are sufficiently engaged in interstate commerce to come within the FAA's exemption for transportation workers.
The FAA's Transportation Worker Exemption
The FAA is the mechanism used to enforce private arbitration agreements. However, the FAA carves out an exception for arbitration agreements of transportation workers. Specifically, 9 U.S.C. § 1 states "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Over the last several years, the Supreme Court has rejected attempts to cabin the reach of this exception, including when the Court recently held that § 1 applies even when the local workers' activities are purely intrastate.
National Company Seeks to Enforce Arbitration Clause with Local Distributor
Flowers Foods, Inc. v. Brock arose from a familiar operating model: a national producer ships goods across state lines but relies on local distributors to complete the final leg of delivery within a single state. Flowers sought to enforce an arbitration clause in its distribution agreement with a franchisee. Flowers argued that § 1 was inapplicable because the franchisee drove only within Colorado. The franchisee distributor, Brock, operated exclusively within Colorado, picking up baked goods from a warehouse and delivering them to nearby stores without ever crossing state lines.
Court Rejects Bright-Line Rule
The Court's decision focused on the "engaged in" language in § 1, and the question presented was ultimately a narrow one. Flowers asked the Court to adopt a bright-line rule that an individual can never qualify for § 1's exemption unless he crosses state lines or interacts with vehicles that do.
The Court reaffirmed that "engaged in" denotes a direct, necessary, and active role in moving goods across borders. However, it does not follow that every individual "engaged in" interstate commerce must personally move the product across state lines. There was no statutory support for Flowers' requested bright-line rule to cabin the reach of § 1.
The Supreme Court Stays Its Course in Rejecting Limitations on § 1
The Court recognized that it had already held in Sw. Airlines Co. v. Saxon that § 1 does not require workers to cross state lines and described its holding in Flowers as adding that § 1 does not turn on "a game of tag with vehicles that do." "At least sometimes," the Court explained, "a worker who transports goods on an intrastate leg of an interstate journey can qualify for §1's exemption without satisfying either of those criteria."
Moreover, just a couple of years ago in Bissonnette v. LePage Bakeries Park St., LLC, Flowers came before the Court again on an issue interpreting § 1. There, the Court unanimously rejected Flowers' attempt to limit § 1 to the "transportation industry." The Court recognized such limitation was not supported by the text of § 1 and would be logistically problematic.
Other Questions Around §1’s Applicability Remain Unresolved
Flowers raised other potential arguments; for example, (1) that it conducted its business with Brock through a distribution agreement it has with an "independently operated company" he owns and (2) that Brock orders, purchases, and takes title to Flowers' goods, before selling them to local stores. The Court recognized lower court decisions holding such facts were relevant to the applicability of § 1. However, the Court did not reach these issues because Flowers did not present them to the Court. Instead, the Court observed that Flowers had only asked it to weigh in on the narrow question of its requested bright-line rule.
What This Means for Transportation Employers
The Supreme Court's holding is ultimately confined due to how Flowers presented the question to the Court, but the takeaway is that workers are not exempt from arbitration under the FAA merely because their activities are entirely intrastate. Rather, what is relevant is whether the workers are part of a broader, coordinated flow of goods across states. The inquiry will remain a fact-dependent one when § 1 is invoked.
Any questions or concerns about the applicability of your arbitration provisions should be discussed with legal counsel. For more information, please contact Baker Donelson's Labor & Employment Group.