Supreme Court Clarifies Interstate Commerce Requirement For FAA’s Arbitration Exemption: Considerations For Employers

On May 28, 2026, in Flowers Foods, Inc. v. Brock, the U.S. Supreme Court issued its fourth ruling in recent years interpreting the scope of the transportation worker exemption found in Section 1 of the Federal Arbitration Act (FAA). In a unanimous decision authored by Justice Neil Gorsuch, the Court held that a driver who does not cross state lines or interact with vehicles that cross state lines still qualifies as a worker in interstate commerce. The decision builds on the Court’s continued expansion of the reach of the transportation worker exemption, and it may carry consequences for employers that rely on arbitration agreements to resolve disputes with workers who move goods, even entirely within a single state.

The plaintiff, Angelo Brock, is an independent distributor who picked up Flowers Foods, Inc.’s products from a Colorado warehouse and delivered them to local retailers without crossing a state line or handling a vehicle that did. When Flowers Foods sought to enforce the arbitration clause in its distribution agreement, Brock argued that the FAA’s Section 1 exemption applied to his contract, which would strip the company of any right to compel arbitration under the statute. Lower courts agreed with Brock’s argument, and the Supreme Court unanimously affirmed the lower courts’ rulings.

The Court’s Holding in Flowers Foods, Inc. v. Brock

Section 1 of the FAA excludes the “contracts of employment” of workers “engaged in foreign or interstate commerce” from the statute’s coverage. The Court held that a worker neither needs to personally cross state lines nor handle vehicles that do so to qualify for this exemption. Instead, the Court held that what is pertinent is whether the worker plays a direct, active, and necessary role in an interstate journey of goods, even if that worker’s individual role is confined entirely to one state.

The Court grounded its analysis in the plain text of the FAA and in longstanding precedent interpreting similar language in the Commerce Clause, dating back more than 150 years. The Court reasoned that interstate commerce does not stop and start at a state border, as a continuous interstate shipment involves intrastate activity, too. Accordingly, the Court held that those who perform such intrastate activity can be just as much a part of the interstate flow of commerce as those who physically cross state lines.

Potential Employer Implications

This ruling may have broad implications for businesses that use arbitration agreements with workers involved in the distribution or delivery of goods, regardless of industry. In earlier decisions, the Supreme Court rejected the idea that Section 1 applies only to workers in the “transportation industry.” The Court expanded the definition of “contracts of employment” to include independent contractors(New Prime Inc. v. Oliveira, 586 U. S. 105 (2019)); expanded the definition of covered workers to include those who load and unload cargo that had already traveled interstate (Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022)); and further expanded the definition to include anyone in the transportation industry if their work plays a direct and necessary role in the free flow of goods across borders (Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024)). Taken together with prior decisions, Flowers Foods may support a broader application of the exemption to workers across a range of industries whose jobs involve moving products from one point in the supply chain to another, provided those goods are part of an interstate journey.

A notable practical impact of this ruling is that workers who never leave their home state may now be exempt from the FAA’s arbitration requirements. Examples may include last-mile delivery drivers, local warehouse workers moving goods destined for out-of-state customers, and similar roles. Businesses cannot assume that a purely local delivery function falls outside the exemption.

However, the Court did not resolve whether certain features of a distributor-style relationship, such as taking title to goods, operating through a corporate entity, or purchasing products for resale rather than delivering them under a service contract, might place a worker outside the scope of the exemption. Employers that structure their relationships with distributors in these ways should not assume they are insulated from this issue and may wish to consider undertaking an analysis of their specific arrangements.

It is worth noting that the FAA exemption does not necessarily mean arbitration is unavailable altogether. Some states have their own arbitration statutes that may not carry the same transportation worker exemption. Whether state arbitration law provides a viable alternative depends on the specific agreement, the governing law clause, and the applicable state statute.

Future Considerations

The Flowers Foods ruling marks the fourth time in roughly seven years that the Supreme Court has ruled on the scope of Section 1 of the FAA, and each time, the Court has sided with workers seeking to avoid arbitration. Accordingly, stakeholders may wish to consider a proactive approach to arbitration agreement drafting and worker classification, instead of relying on assumptions about what the FAA covers.

Businesses that use arbitration agreements with workers involved in product distribution, delivery, or supply chain operations — regardless of whether those workers are classified as employees, independent contractors, or operate through separate business entities — may wish to examine existing contracts and arbitration strategies in light of the Flowers Foods decision.