Dive Brief:
- Transportation workers may be exempt under federal law from contractual agreements that compel arbitration even if they do not cross state lines or interact with vehicles that do so, the U.S. Supreme Court held Thursday.
- The Federal Arbitration Act imposes no such limitations on its exemption for such workers, Justice Neil Gorsuch wrote for a unanimous court in Flowers Foods v. Brock. Under the FAA, “interstate commerce” may encompass intrastate portions of a single, continuous journey of goods that begins in one state and ends in another.
- Flowers Foods had argued that people like the respondent, a franchisee who picked up and delivered its products on an intrastate basis, were not “engaged” in interstate commerce within the meaning of the FAA. But the court disagreed, holding that individuals can be “direct, necessary, and active participants” in such commerce. The company did not immediately respond to a request for comment.
Dive Insight:
Flowers Foods represents the latest in a series of arbitration-related decisions in which the high court has refused to narrow the categories of transportation workers included within the scope of the FAA’s exemption. The case is a direct follow up to 2024’s Bissonnette v. LePage Bakeries, where SCOTUS ruled against a Flowers subsidiary and held that such workers need not work in the transportation industry to be exempt from arbitration.
During oral arguments in March, counsel for Flowers posited that “last mile” drivers and similar intrastate delivery workers were not covered by the FAA because their work occurs after goods have completed an interstate journey. Gorsuch was one of several justices to question Flowers’ reasoning during the hearing.
In the decision, Gorsuch explained that the FAA’s exemption is inclusive of drivers whose work results in one of Flowers’ products — for instance, a truckload of Butterscotch Krimpets — moving from a bakery in one state to a purchasing customer in another, irrespective of whether the drivers also cross state lines. Flowers’ position, Gorsuch wrote, would leave out several workers who are key to fulfilling the contract between the bakery and the customer.
“But that cannot be right,” he continued. “Each of the drivers played a direct, active, and necessary part in ensuring the Krimpets got from a point in [State B] to a point in [State A] as the contract required.”
Flowers nonetheless argued that the franchisee in this case did not qualify because he distributed its products through an independently operated company that he owned. The franchisee also ordered, purchased and took title to Flowers’ goods before selling them to local stores. Such details may be relevant in assessing FAA claims, the high court said, but Flowers did not ask the court to decide their legal significance in the present case.
In an email to HR Dive, Jennifer Bennett, principal at Gupta Wessler and counsel for the respondent, said that the decision protects the ability of essential delivery workers to have their day in court. “Today’s opinion decisively rejects the latest attempt by companies like Flowers to force these drivers into arbitration,” Bennett said.
Though decided on narrow grounds, the court’s analysis provided little guidance on how it might apply the FAA’s exemption to similar circumstances in which workers do not transport goods or who are more loosely connected to transport, Christopher Ward, partner at Foley & Lardner, said in an email.
“We had hoped the Court would give guidance to address the lower courts’ ongoing expansion of the exemption to those types of classes of workers, and this opinion does nothing to curtail that or help lower courts figure out what is transportation and what is not,” Ward added.