Supreme Court Clarifies FAA Exemption for “Last-Mile” Drivers

The United States Supreme Court has issued an important decision clarifying the scope of the Federal Arbitration Act’s (FAA) transportation worker exemption. In Flowers Foods, Inc. v. Brock, the Court held that workers who perform purely intrastate deliveries may still fall within the exemption if they are part of a continuous interstate flow of goods.

Under this decision, a worker does not need to cross state lines—or directly interact with interstate transportation—to qualify as “engaged in interstate commerce” for purposes of the FAA. 

While the ruling expands the potential reach of the exemption, it also provides a clearer framework—grounded in text and history—for evaluating when the exemption applies.

The FAA’s Transportation Worker Exemption

The FAA generally requires courts to enforce arbitration agreements. Section 1, however, exempts contracts of employment for certain transportation workers—those “engaged in … interstate commerce.” 

In recent years, the Supreme Court has repeatedly returned to this provision, emphasizing that it must be interpreted according to its statutory text and the meaning those words carried when Congress enacted the statute.

The Issue: Where Does Interstate Commerce End?

At issue in Flowers Foods was whether contracts for workers who deliver goods locally—but only after those goods have traveled across state lines—fall within the exemption.

Lower courts had split on this question. Some adopted a narrow view focused on whether the worker personally crossed state lines. Others took a broader, more functional approach, asking whether the worker’s role was part of a continuous interstate transportation process.

The Supreme Court resolved that split.

The Court’s Decision

The Court held that a worker who transports goods on an intrastate leg of an interstate journey can qualify for the FAA exemption—even if that worker never crosses state lines. 

In doing so, the Court rejected a bright-line rule tied to geography and instead focused on participation in the overall movement of goods across state lines.

The Court’s Reasoning: A Textual and Historical Approach

Consistent with its recent FAA decisions, the Court grounded its analysis in text, structure, and historical meaning—and notably looked back to how courts and dictionaries in the late 1800s understood these terms.

The Court began with the phrase “engaged in.” At the time of the FAA’s enactment, to “engage” in an activity meant to participate in or be involved in it, not to complete every aspect of it personally. 

Next, the Court examined “interstate commerce,” relying on contemporaneous dictionary definitions and historical authorities interpreting the Commerce Clause. Those sources treated interstate commerce as the transportation of goods across state lines as part of a single, continuous flow, rather than as isolated segments broken apart by geography. 

That historical lens proved decisive. If interstate commerce is understood as a unified movement of goods, then workers who handle one segment—whether the first mile, middle mile, or last mile—are all participating in the same interstate transaction.

The Court thus rejected the notion that interstate commerce “switches off” when goods reach a warehouse or cross a state boundary. Instead, it continues through final delivery so long as the goods remain in the stream of interstate transit.

Put simply, the Court treated the journey of goods as the relevant unit—not the worker’s individual route.

That framing led directly to the holding. Workers performing last-mile deliveries are still “engaged in interstate commerce” when they:

• handle goods moving in a continuous interstate stream, and
• play a “direct, active, and necessary part” in completing that movement. 

Practical Implications

The decision confirms that courts will apply a functional, fact-specific inquiry, focusing on the movement of goods and the worker’s role within that process.

At the same time, the ruling stops short of creating a categorical rule:

• Not all local delivery workers will qualify
• The exemption will depend on the connection between the worker’s duties and an interstate flow of goods
• Employers retain the ability to distinguish roles that are more attenuated from that flow 

Targeted Takeaways for Employers

For Gig Economy and Platform-Based Companies

• Classification and role definition matter more than ever. Courts will look closely at how the platform structures the delivery process and characterizes the flow of goods.
• Not all platform workers are alike. Workers delivering goods in a coordinated interstate supply chain may be treated differently from those performing purely local, stand-alone transactions.
• Evidence of the “stream of commerce” will be critical. How goods enter, move through, and exit the platform ecosystem will likely shape exemption arguments.

For Traditional Distribution, Retail, and Logistics Employers

• Supply chain structure is now central to the analysis. Courts will examine whether deliveries are part of a continuous interstate process or a local, independent transaction.
• Warehouse and staging points are not dispositive. The Court made clear that interstate commerce does not necessarily end when goods arrive in-state.
• Arbitration agreements remain enforceable for many roles. Employees whose duties are sufficiently removed from interstate transport may still fall outside the exemption.

Across All Employers

• The inquiry is broader—but still workable. The Court provides a structured framework grounded in text and history, not an open-ended standard.
• Early factual development will be key. Employers should be prepared to show where a worker fits—or does not fit—within an interstate distribution chain.
• Now is a good time for a targeted audit. Arbitration programs should be reviewed with an eye toward roles most likely to implicate the exemption.
• Arbitration agreements may still be enforceable under state arbitration laws if the FAA does not apply.
• The opinion does not address all transportation worker issues, including for example, business-to-business arbitration agreements that involve transportation, in which there is currently a circuit split. 
• The opinion also noted that there could be other bases that could be relevant as to why certain classes of workers performing the duties enumerated in Flowers might not qualify for the Section 1 exemption, but those issues were not before the Court. 

Bottom Line

Flowers Foods resolves a significant open question and confirms that the FAA’s transportation worker exemption can extend to certain intrastate delivery roles that are part of a continuous interstate movement of goods.

At the same time, the Court’s textual and historically grounded analysis offers a clear analytical framework—one that leaves room for employers to continue enforcing arbitration agreements where workers fall outside that interstate stream. Additionally, arbitration agreements may be enforced under state arbitration law if the FAA does not apply.