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Last week, in Flowers Foods, Inc. v. Brock, the Supreme Court of the United States “delivered” a ruling that will have a noteworthy impact on employers who have arbitration agreements and employees who play a significant role the transport of goods in interstate commerce. The question before the Court was whether an employee can qualify for the “transportation worker” exemption to the Federal Arbitration Act (“FAA”) if that employee never crosses state lines and never interacts with vehicles that do. The Court concluded that such employees (often referred to as “last mile” drivers) can qualify for the exemption (i.e., that they cannot be compelled by their employer to enter into arbitration agreements) and that there was no requirement that they cross state lines or interact with vehicles that cross state lines to qualify for the exemption. We “unpack” the Court’s ruling and its potential impact on employers below.

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Flowers Foods, Inc. (“Flowers”), the defendant in this case, is one of the largest producers of baked goods in the country. The plaintiff, Angelo Brock (“Brock”), was a franchised driver who picked up those baked goods in a warehouse in Colorado and delivered them to local stores without ever leaving the state of Colorado. Those baked goods had been delivered to that warehouse from one of Flowers’s out of state bakeries. Brock sued Flowers in federal court alleging that he was misclassified as an independent contractor, and, as a result of that misclassification, Flowers violated federal and state wage and hour laws.

Flowers responded to the complaint by filing a motion to compel arbitration, which the district court denied, finding that Brock fell within the transportation worker exemption of the FAA. Flowers appealed, and the 10th Circuit affirmed, finding that Brock’s intrastate route formed a constituent part of the interstate journey of Flowers’s goods from out of state bakeries to their intended destinations at retail stores. Flowers then petitioned the U.S. Supreme Court for review, which the Court granted.

On appeal, Flowers argued that there should be a bright line rule that drivers who do not cross state lines or interact with vehicles that do should not qualify for the transportation worker exemption under the FAA. Flowers contended that such drivers were not “engaged in interstate commerce.” The Court rejected that argument.

In coming to that conclusion, the Court reviewed the statutory language of Section 1 of the FAA, specifically that the exemption applies to “workers engaged in . . . interstate commerce.” The Court noted that nothing in the plain meaning of those terms at the time that Congress passed the FAA required an individual to cross state lines or interact with a vehicle that does. The Court also noted that much of a “continuous carriage” may start in one state and end in a different one, but is possible for a person to take part in that journey without leaving a state or touching vehicles that do.

The Court then illustrated this point with hypotheticals and also reviewed several of its cases interpreting the Commerce Clause in the Constitution, noting that employees could be engaged in interstate commerce while performing duties that were solely intrastate. The Court found those cases to be probative of what an ordinary person would have understood the terms used in the FAA to mean (i.e., engaged in interstate commerce). The Court then reaffirmed that, to be “engaged in” interstate commerce, a worker must have a direct, necessary and active role in moving goods across borders.

Ultimately, the Court rejected Flowers’s proposed rule and concluded that, “[a]t least sometimes, a worker who transports goods on an intrastate leg of an interstate journey” can qualify for the transportation worker exemption without crossing state lines or interacting with vehicles that do.

Potential Impact of Flowers and Employer Takeaways

After Flowers, employers can expect to see more employees trying to invoke the transportation worker exemption to the FAA in an effort to avoid their arbitration agreements, which, among other things, likely contain class action waivers. Employers should expect to see this argument made by employees who deliver goods as part of their job duties and those who do not. This could result in more class action lawsuits proceeding in court, as opposed to the individual arbitrations that such agreements typically require.

However, the success of the argument will likely remain very fact dependent because the Flowers Court reaffirmed that being engaged in interstate commerce requires a “continuous carriage” of goods across state lines and the worker’s having a direct, necessary and active role in moving goods across state lines. These realities will require a detailed inquiry into the particular interstate transaction involving the goods, as well as the job duties of the workers involved.

If you would like assistance in determining whether certain employees may qualify for the transportation worker exemption under the FAA, you may contact the author or another attorney in Vedder’s Labor and Employment group.

Supreme Court Issues Key Ruling on Federal Arbitration Act Exemption for “Last Mile” Drivers

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