The Supreme Court Again Addresses Whether Drivers Are Exempt from FAA Arbitration Agreements

Written on July 08, 2026.

Tag(s): July 2026 Newsletter

The Federal Arbitration Act (FAA) encourages the use and enforcement of arbitration agreements, although the Act contains an exception for “transportation workers engaged in interstate commerce.” There have been many issues arising as to what type workers are exempt from employment arbitration agreements under the FAA. Flowers Foods v. Brock, No. 24-935 (U.S., 5/28/26).

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The fact pattern involved a local delivery driver that moved baked goods from a Colorado warehouse to local stores, and it was found that he qualified for the exemption even though he personally never physically crossed state lines. The ruling clarified that local delivery drivers would invoke the interstate exemption so long as they were part of a larger supply chain that crosses state borders. These type local delivery drivers are often referred to as “last mile” local delivery drivers.

The ruling relies on precedent establishing that the transportation of goods entirely within one state remains engaged in interstate commerce if the goods are destined for or brought from outside the state.

The Supreme Court had previously expanded the exemption by ruling that the exemption was not limited to the transportation industry. The current ruling addresses the issue of whether the driver engages in interstate commerce if he only delivers products locally.

Editor’s Note: Although this case resolves certain issues as to the scope of the exemption from the Federal Arbitration Act, it does not resolve other issues such as the scope of an “employment” contract where the contract is between two legal entities that has a distribution agreement rather than an employment agreement. Further, employers may still seek to take advantage of state arbitration laws which may allow the enforcement of employment contracts even if coming within the exemption of the FAA.

This article is part of our July 2026 Newsletter.

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