Supreme Court expands FAA exemption for intrastate delivery drivers
The Supreme Court unanimously ruled that transportation workers need not cross state lines to qualify for the FAA's interstate commerce exemption, affecting arbitration agreements with many delivery and logistics employees.
In a unanimous decision, the Supreme Court has broadened the scope of the Federal Arbitration Act’s (FAA) exemption for transportation workers. The Court held that a worker does not need to physically cross state lines to be considered “engaged in interstate commerce.” This ruling significantly impacts companies that rely on arbitration agreements to manage disputes with their workforce, particularly in the logistics, last-mile delivery, and gig economy sectors. Previously, many employers argued that drivers who operated solely within one state were not covered by the exemption and could be compelled to arbitrate claims. The decision rejects that narrow view, focusing instead on whether the worker is part of the continuous stream of interstate commerce. As a result, companies now face an increased risk of class-action lawsuits and other court proceedings from a larger pool of workers. Counsel should immediately review existing arbitration agreements and worker classifications to assess their enforceability and mitigate potential litigation exposure under this new, more expansive standard.