Arbitration
FAA Transportation Exemption Reaches Intrastate Drivers
Updated
In Flowers Foods, Inc. v. Brock, the United States Supreme Court held that a worker who transports goods on an intrastate leg of an interstate journey can qualify for the Federal Arbitration Act’s transportation-worker exemption without crossing state lines or interacting with vehicles that do. Writing for a unanimous Court, Justice Gorsuch affirmed the Tenth Circuit’s refusal to compel arbitration.
Background
Flowers Foods is one of the country’s largest producers of packaged baked goods, with bakeries in 19 states. To get its products to market, it relies in part on franchisees who buy the rights to distribute those products in specific geographic territories.
Angelo Brock is one such franchisee, serving the Denver area. He picks up Flowers’s products from a warehouse in Colorado and delivers them to local stores, all without leaving the state.
In 2022, Brock sued Flowers in federal district court, alleging that the company had underpaid him and other distributors in violation of various federal and state laws. Flowers moved to compel arbitration under a distribution agreement Brock had signed. The district court denied the motion, and the Tenth Circuit affirmed, reasoning that Brock’s intrastate route was a constituent part of the interstate journey of Flowers’s goods.
What the Court Held on the Section 1 Exemption
Section 1 of the Federal Arbitration Act provides that “nothing” in the statute shall be used to compel arbitration in disputes involving the “contracts of employment” of any class of workers “engaged in” interstate commerce. Flowers argued that, to be so engaged, a worker must either cross state lines or interact with a vehicle that does.
The Court rejected that bright-line rule. Looking to the ordinary meaning of the statutory terms when the FAA was enacted in 1925, it reasoned that interstate commerce includes transporting goods between points in different states, an undertaking that can involve substantial intrastate activity. A person can take part in that continuous journey without leaving a single state.
The Court found support in older decisions like The Daniel Ball, which treated a steamer operating entirely within Michigan as engaged in interstate commerce because it carried goods bound for or arriving from other states. Reaffirming that section 1 requires a “direct,” “necessary,” and “active” role in moving goods across borders, the Court held that a worker can meet that standard on an intrastate leg alone.
A worker who transports goods on an intrastate leg of an interstate journey can qualify for the FAA’s section 1 exemption without crossing state lines or interacting with vehicles that do.
What the Court Left Open
Flowers hinted at other reasons Brock might not qualify, noting that it deals with him through a distribution agreement with an independently operated company he owns, and that he orders, purchases, and takes title to the goods before reselling them. The Court observed that some lower courts have found such facts relevant to whether a “contract of employment” exists or whether section 1 applies.
But because Flowers pressed only its cross-or-tag rule and did not ask the Court to decide the legal significance of those facts, the Court declined to address them. It affirmed the judgment of the Tenth Circuit and expressly left other potential limits on section 1’s reach for another day.
What This Means for You
This decision establishes that a transportation worker can fall within the FAA’s section 1 exemption even if he never crosses state lines or touches a vehicle that does, so long as his intrastate work is a direct, necessary, and active part of moving goods across borders. It touches disputes over whether an arbitration agreement can be enforced against delivery and distribution workers.
I write these summaries as general information about developments in California employment law. They are not legal advice and don’t create a mediator–client relationship. For guidance on a specific matter, consult a qualified attorney.