In a unanimous opinion issued today in Flowers Foods, Inc. v. Brock, the U.S. Supreme Court held that a driver transporting an intrastate leg (i.e., not crossing state lines) that is part of an interstate shipment of goods is engaged in interstate commerce under the “transportation worker” exemption from the Federal Arbitration Act (FAA). The decision resolves a split in the U.S. Courts of Appeals on the question of what it means for a driver to be engaged in interstate commerce under the FAA.
The FAA generally requires courts to enforce arbitration agreements according to their terms, including class and collective arbitration waivers. However, the FAA contains an exemption for contracts of employment with transportation workers who are engaged in interstate commerce. At issue in Flowers Foods was the interstate commerce element. The Court held that the statutory text does not require a driver to cross state lines to be engaged in interstate commerce, and that a driver can engage in interstate commerce as part of a continuous interstate journey.
The Court rejected Flowers Foods’s sole theory that, to be engaged in interstate commerce, a driver must either cross state lines or interact with a vehicle that does so (e.g., loading or unloading). Instead, the Court held that drivers who are “direct, necessary, and active participants in moving goods from … points in one state to points in another state” are exempt, even if their work does not involve “crossing state lines or interacting with vehicles that do.” (internal quotations omitted).
Notably, the Court acknowledged a difference in opinion in the lower courts on whether contracting with a business entity qualifies as a “contract of employment” even when the business is engaged in interstate commerce, another element of the transportation worker exemption. The Court’s opinion leaves open that question, which may present the next opportunity for the Court to further refine the scope of the exemption.
Even where the FAA does not apply because of the transportation worker exemption, arbitration may be available under state arbitration laws and, therefore, may remain a viable alternative to resolve disputes. The availability of arbitration under state law is jurisdiction-specific and may depend on the specific language of the arbitration agreement, so effectively compelling arbitration under state law requires careful planning and analysis.
For more information, contact Greg Feary, Braden Core, Prasad Sharma, or Jim Eckhart.
