Supreme Court Widens the Federal Arbitration Act's Transportation Worker Exemption to Last-Mile Drivers

Kenney Shelton Liptak Nowak LLP | Transportation and Labor Update

By: Karl E. Daniel, Esq.

A driver who never leaves Colorado is, according to the Supreme Court, still engaged in interstate commerce. That holding, issued unanimously on May 28, 2026, closes off the argument that carriers have used for years to compel arbitration against local delivery drivers: that a worker has to cross a state line, or touch a truck that does, before the Federal Arbitration Act's transportation worker exemption applies.

In Flowers Foods, Inc. v. Brock, No. 24-935, the Court affirmed the Tenth Circuit and held that a worker who transports goods only on the intrastate leg of an interstate journey can still qualify for the exemption in Section 1 of the FAA. For carriers, distributors, and logistics companies operating in New York with independent contractor or franchisee delivery networks, many of which sit within the Second Circuit's jurisdiction, the decision removes a defense many had relied on to keep wage and hour disputes in arbitration rather than court.

What Happened

Flowers Foods distributes its baked goods, including Wonder Bread, through franchisees who buy distribution rights to specific territories. Angelo Brock held the distribution rights for the Denver area. He picked up Flowers's products from an in-state warehouse and delivered them to local stores, never crossing into another state himself. When Brock sued Flowers for underpayment under federal and state wage laws, Flowers moved to compel arbitration under the distribution agreement Brock had signed. The district court denied the motion, and the Tenth Circuit affirmed, holding that Brock's intrastate route formed a constituent part of the larger interstate journey his employer's goods traveled.

Flowers asked the Supreme Court to adopt a bright-line rule: a worker cannot qualify for Section 1's exemption unless he personally crosses a state line or physically interacts with a vehicle that does. The Court rejected that rule outright.

The Court's Reasoning

Writing for a unanimous Court, Justice Gorsuch grounded the decision in the ordinary meaning of "engaged in interstate commerce" at the time the FAA was adopted in 1925, when the phrase already encompassed transportation "between points in one state and points in another state," including the intrastate segments of a longer interstate trip. The opinion leaned heavily on The Daniel Ball, an 1871 decision holding that a steamer running entirely within Michigan waters was nonetheless engaged in interstate commerce because it carried goods bound to or from other states.

The Court illustrated the point with a hypothetical: three drivers relay a shipment of Butterscotch Krimpets from a bakery in one state to a customer's headquarters in another, with only the middle driver actually crossing the border. Under Flowers's proposed rule, only that middle driver would be exempt. The Court called that result untenable, since each driver played a direct, active, and necessary role in the same continuous interstate shipment.

This is the fourth time in recent years the Court has expanded Section 1's reach rather than narrow it, following New Prime Inc. v. Oliveira (2019), which extended the exemption to independent contractors, Southwest Airlines Co. v. Saxon (2022), which held a cargo loader exempt despite never leaving the ground, and Bissonnette v. LePage Bakeries Park St., LLC (2024), which held that a worker need not be employed in the transportation industry at all, so long as the work plays a direct and necessary role in the interstate movement of goods.

What the Court Left Open

The decision is narrower than it might first appear. The Court expressly declined to resolve two arguments Flowers raised only in passing: whether the exemption applies when the carrier's contract runs through an independently operated company the worker owns, rather than with the worker individually, and whether taking title to goods before resale changes the analysis. 

Both issues remain open for lower courts, and the Court noted an existing split on the business-entity question between the Ninth Circuit, which has held Section 1 inapplicable to contracts between two business entities, and the Second Circuit, which, in Silva v. Schmidt Baking Distribution, LLC (2025), held the exemption can still apply to agreements structured through single-employee corporations.

What This Means for New York Carriers

That Second Circuit citation matters directly here. Silva already placed this Circuit on the more worker-favorable side of the business-entity question before Flowers Foods came down, and Flowers Foods gives that reasoning additional support by foreclosing the cross-or-tag argument entirely. Motor carriers, food and beverage distributors, and last-mile delivery networks operating in New York that structure their driver relationships as independent contractor or franchisee agreements, and that route disputes to arbitration under those agreements, should assume the FAA no longer offers a path to compel arbitration solely because the driver's own route stayed within state lines.

The decision does not, however, invalidate arbitration agreements outright. Section 1 only removes the FAA's mechanism for compelling arbitration; it does not itself void an arbitration clause. Carriers whose agreements include a severable state-law arbitration provision, or that are governed by New York's own arbitration statute under CPLR Article 75, may still have an avenue to enforce arbitration through state law, though that analysis is separate from, and not automatically resolved by, the FAA exemption question.

Practical Takeaways

• Assume the FAA's transportation worker exemption applies to intrastate last-mile and local delivery drivers whose work forms part of a larger interstate supply chain, regardless of whether the driver personally crosses state lines.

• Review distribution and driver agreements for reliance on the FAA as the sole mechanism to compel arbitration. A standalone state-law arbitration clause, properly drafted, may preserve an alternative path even where the FAA exemption applies.

• The business-entity question remains open and worth raising where it applies. Carriers structuring agreements through single-employee corporations should watch for further Second Circuit development following Silva, since the Court expressly left that door open.

• Do not assume Flowers Foods forecloses all defenses. The Court did not decide whether title passage or independent contractor status changes the outcome, leaving room for fact-specific arguments in individual cases.

• Wage and hour claims previously routed to arbitration under an FAA-based clause should be reassessed for litigation risk now that a court, rather than an arbitrator, is likely to hear them.

Kenney Shelton Liptak Nowak LLP advises carriers, distributors, and logistics companies on transportation worker classification, arbitration agreement enforcement, and wage and hour compliance. For questions about how this decision may affect existing driver or distributor agreements, contact our transportation defense team.