The Federal Arbitration Act (“FAA”) has been at the center of employment litigation for decades. Courts have consistently held that properly drafted employment arbitration agreements are enforceable and require parties to arbitrate disputes arising from employment rather than litigate such disputes in court before a judge or jury. Courts have also ruled that state laws cannot stand as an obstacle to the enforcement of covered arbitration agreements, including agreements that bar class actions. The important role arbitration agreements play in employment settings has encouraged litigation focusing on exemptions from the FAA that afford individuals an opportunity to bypass arbitration and instead litigate claims in court.
The U.S. Supreme Court addressed the exemption that exists in Section 1 of the FAA. It provides that “nothing” in the law shall be used to compel arbitration in disputes involving the “contracts of employment” of any class of workers “engaged in . . . interstate commerce.” 9 U.S.C. § 1. In Flowers Foods, Inc., v. Brock, __ U.S. __ (May 28, 2026), the Supreme Court examined the scope of the exemption and found it applicable to certain drivers sometimes referred to as “last-mile” drivers. The case arose from a proposed class action asserting that Flowers violated state and federal laws by misclassified drivers as independent contractors rather than employees.
1. Background
Flowers Foods is one of the nation’s largest producers of packaged baked goods, such as Wonder Bread. It distributes its products across the country from its bakeries in 19 states. To get its products to market, the company depends in part on franchisees who buy the rights to distribute the products in specific territories, including Angelo Brock, a franchisee who serves the Denver area. Brock picks up products from a warehouse in Colorado and delivers them to local stores, all without leaving the state.
2. The Lawsuit
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. In response, Flowers filed a motion asking the court to send the dispute to arbitration. It argued that Brock had signed a distribution agreement promising to arbitrate any disagreement that might arise between himself and Flowers.
Ultimately, the district court denied Flowers’ motion and the Tenth Circuit Court of Appeals affirmed. The Tenth Circuit rested its decision on Section 1 of the FAA, which contains an exception from the requirement directing courts to enforce arbitration agreements. Reasoning that Brock belonged to a class of workers engaged in interstate commerce, the court concluded that it lacked authority to compel the arbitration Flowers sought. The court explained that Brock did not cross state lines himself or interact directly with those who did. But, those facts were not dispositive because, what mattered was that Brock’s “interstate route formed a constituent part of the . . . interstate journey of Flowers’ goods from out-of-state bakeries to their intended destinations at retail stores.”
3. The Issue Before The Supreme Court
Flowers petitioned the Supreme Court to review the case to resolve a single question: “whether someone can qualify as a worker ‘engaged in interstate commerce’ under Section 1 of the FAA if he never crosses state lines and never interacts with vehicles that do.”
Flowers’ sole theory was that, to be engaged in interstate commerce for purposes of Section 1, a worker must either cross state lines or interact with a vehicle that does (say, by loading or unloading the goods it carries). The Supreme Court concluded that theory is incorrect. In some instances, a worker “who transports goods on an intrastate leg of an interstate journey can qualify for Section 1’s exemption” without satisfying either of those criteria. It observed that “individuals can sometimes be direct, necessary, and active participants in moving goods ‘from . . . points in one state” to “points in another state” without crossing state lines or interacting with vehicles that do,” citing Blacks’s 1001.
4. The Supreme Court’s Added Remarks
The Supreme Court appeared to question the arguments made by Flowers in the litigation. It noted that Flowers did not ask the Supreme Court to decide the legal significance of several facts raised by the litigation, but instead ventured to ask the Supreme Court to adopt a bright-line rule that an individual can never qualify for Section 1’s exemption unless he crosses state lines or interacts with vehicles that do. The Supreme Court could not see how the FAA’s statutory text could support that interpretation. It thus affirmed the judgment of the Tenth Circuit.
The Flowers decision recognizes the significance of the FAA’s Section 1 exemption and discussed its scope. While the case focusses on drivers, it can be expected to lead to creative arguments that others will qualify for an FAA exemption that will enable them to evade the impact of arbitration agreements. Employers are encouraged to discuss the potential implications of the decision on other individuals.
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About The Author
Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.
Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.