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Supreme Court expands FAA exemption for last-mile drivers, raising new arbitration risks for employers

6/4/26

By: Sunshine Fellows

On May 28, 2026, the United States Supreme Court issued a unanimous decision in Flowers Foods, Inc. v. Brock, No. 24-935, clarifying that certain “last-mile” delivery drivers may fall within the Federal Arbitration Act’s (FAA) transportation worker exemption, even if they never cross state lines. The ruling has important implications for employers that rely on arbitration agreements and underscores the need to consider state-law alternatives where the FAA may not apply.

Background

The case involved a delivery driver who transported baked goods from in-state warehouses to local retail locations. Although his deliveries were entirely intrastate, the goods originated outside the state and moved through a continuous interstate supply chain.

The key question before the Court was whether workers who complete a local leg of an interstate journey are “engaged in interstate commerce” under Section 1 of the FAA. That provision exempts transportation workers from the FAA’s otherwise broad mandate requiring enforcement of arbitration agreements.

What the Supreme Court held

Writing for a unanimous Court, Justice Neil Gorsuch rejected a rule that would limit the exemption to workers who cross state lines or directly participate in interstate transportation. Instead, the Court focused on the worker’s role in the broader flow of interstate commerce.

Because last-mile drivers may complete the final segment of an interstate journey, the Court held that they can qualify as transportation workers exempt from the FAA, even when their work occurs entirely within a single state.

Why it matters

The decision continues the Court’s trend of interpreting the FAA’s transportation worker exemption broadly and may significantly expand the categories of workers excluded from FAA coverage. Employers that rely on arbitration agreements with delivery drivers, warehouse personnel, logistics workers, or others involved in the movement of goods should reassess whether those agreements remain enforceable under federal law.

If a worker falls within the exemption, an arbitration agreement that relies solely on the FAA may be vulnerable to challenge. Employers should therefore evaluate both job duties and the broader supply chain to determine whether particular roles could be viewed as part of interstate commerce.

State-Law backstop

Importantly, the FAA exemption does not render arbitration agreements unenforceable in all cases. Many states have their own arbitration statutes that may provide an independent basis for enforcement.  Although requirements for an enforceable arbitration agreement vary by jurisdiction and it is critical to be aware of such requirements, state laws generally recognize the validity of arbitration agreements.

To preserve enforceability, employers should consider incorporating a state-law fallback provision into their arbitration agreements. These provisions expressly state that, if the FAA is found not to apply, the agreement will be governed and enforced under applicable state law to the fullest extent permitted.

This approach may be particularly important after Flowers Foods, as more workers may now fall outside the FAA’s scope.

What employers should do now

In light of the decision, employers should take a fresh look at their arbitration programs, focusing on:

• Worker classification: Identify roles that involve the movement of goods within a broader interstate supply chain, even if work is performed locally.
• Agreement drafting: Include express fallback language specifying that state law governs if the FAA is deemed inapplicable.
• Clarity and presentation: Ensure arbitration provisions are clearly written, prominently presented, and not buried in onboarding materials.
• Proof of assent: Maintain reliable records demonstrating that employees received and affirmatively accepted the agreement, particularly in electronic onboarding systems.
• Program structure: Consider whether separate or tailored arbitration agreements are appropriate for workers more likely to qualify as transportation workers.

Key takeaway

Flowers Foods reinforces that arbitration agreements are not one-size-fits-all. As the transportation worker exemption continues to expand, employers should proactively review their agreements, evaluate which workers may be affected, and ensure that their arbitration programs are supported by both federal and state-law enforcement strategies.

For more information on this topic contact Sunshine Fellows at sunshine.fellows@fmglaw.com or your local FMG attorney.

Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.