PUBLICATIONS

Executive Summary: On May 28, 2026, the U.S. Supreme Court issued a unanimous decision in Flowers Foods, Inc. v. Brock broadening the scope of the Federal Arbitration Act’s (FAA) transportation worker exemption under 9 U.S.C. § 1. The Court held that workers engaged in intrastate segments of interstate commerce, such as last-mile delivery drivers, can qualify for the exemption even if they do not cross state lines or interact with vehicles that do. This decision builds on the Court’s prior rulings, including Bissonnette v. LePage Bakeries Park St., LLC, further expanding the exemption’s reach. Employers relying on arbitration agreements, particularly in industries involving transport in commerce, should take note of this decision and re-evaluate enforceability in light of the expanded scope with which the Court interprets the exemption. Conversely, employers should take note of how the decision leaves open key situations to contest the exemption.

Background Facts

Flowers Foods, Inc., a major producer of packaged baked goods, distributes its products nationwide through franchisees who purchase distribution rights for specific territories. Angelo Brock, a franchisee in Colorado, delivered Flowers products to local stores without crossing state lines. In 2022, Brock filed a class and collective action alleging wage violations under federal and state laws. Flowers sought to compel arbitration under the FAA, citing a distribution agreement with an arbitration clause. The Tenth Circuit denied Flowers’ motion, finding Brock exempt under Section 1 of the FAA as a transportation worker engaged in interstate commerce, despite his intrastate deliveries. The Supreme Court granted certiorari to resolve whether workers who do not cross state lines or interact with interstate vehicles can qualify for the exemption.

The Court’s Holding and Reasoning

The Supreme Court affirmed the Tenth Circuit’s decision, holding that workers transporting goods on intrastate segments of interstate commerce can qualify for the FAA’s Section 1 exemption. Writing for a unanimous Court, Justice Gorsuch rejected Flowers’ proposed “cross-or-tag” rule, which would have required workers to either cross state lines or interact with vehicles that do. The Court emphasized that the statutory text of 9 U.S.C. § 1 does not impose such a requirement and that the term “engaged in interstate commerce” encompasses intrastate activities that are part of a continuous interstate journey.

The Court relied heavily on historical precedent, including The Daniel Ball decision (from the year 1871) which held that intrastate transportation of goods destined for other states constitutes interstate commerce. Similarly, in Rearick v. Pennsylvania (1906), the Court found that a salesman delivering goods within a state as part of an interstate transaction was engaged in interstate commerce. These cases demonstrated to the Court that workers can play a “direct, necessary, and active” role in interstate commerce without crossing state lines or interacting with interstate vehicles.

What Employers Must Know Moving Forward

The Flowers decision has significant implications for employers, particularly those relying on arbitration agreements. To limit litigation exposure, employers should consider the below:

1. Arbitration Agreements: Employers must carefully evaluate whether their workers fall within the FAA’s transportation worker exemption. Workers involved in last-mile delivery or other intrastate segments of interstate commerce may now be exempt from arbitration agreements.
2. Last-Mile Delivery Workers: The decision confirms that last-mile delivery drivers, specifically, even those operating entirely within a single state, can qualify as transportation workers engaged in interstate commerce if their work forms part of a continuous interstate journey.
3. Independent Contractors and Franchisees: Independent contractors and franchisees are not excluded from the exemption.
4. Class and Collective Action Exposure: With arbitration agreements potentially unenforceable for this new category of workers, employers face increased exposure to class and collective actions, particularly in industries reliant on delivery networks.
5. Irrelevance of Employer Industry: The exemption applies based on workers’ activities, not the employer’s industry. Employers outside traditional transportation sectors, such as retail or food distribution, may still be affected.

Unanswered Questions

While the Flowers decision provides clarity on several issues, it leaves others unresolved:

1. “Intended Destination” Before Final Delivery: The Court did not decide whether workers who take title to goods before final delivery are exempt. The Court cited lower court holdings that this, and other events that occur when goods change hands mid-travel, render the goods as having reached their “intended destination” at that interim point—requiring the goods to cross state borders during the remainder of their journey to qualify for the exemption. Despite citing only cases supporting this proposition, the Court declined to officially endorse it because the petition for certiorari had not asked the Court to address the issue.
2. Definition of “Contract of Employment”: The Court declined to address whether contracts between business entities, such as franchise agreements, qualify as “contracts of employment” under 9 U.S.C. § 1. Despite acknowledging that lower courts have reached differing conclusions on this question, the Court noted that this issue, too, was absent from the petition for certiorari, and thus, not before the Court. Thus, the scope of what constitutes a “contract of employment” under 9 U.S.C. § 1 remains unsettled, particularly for independent contractors and franchisees.