Supreme Court Says Last-Mile Delivery Drivers May Be Exempt from FAA

Quick Hits

• The Supreme Court held that delivery drivers who deliver goods originating from out of state may fall under the FAA’s exemption for certain transportation workers “engaged in … interstate commerce,” even if they do not cross state lines or interact with vehicles that do.
• The decision is the latest in a series of Supreme Court rulings in recent years interpreting the transportation worker exemption in the FAA.
• While a transportation worker is exempt from the FAA, an arbitration agreement with such a worker nonetheless may be enforceable under state law.
• Employers may want to review (1) the extent to which they have workers who might be considered “transportation workers” exempt from the FAA, (2) whether they want to add or revise a back-up state choice of law provision in their arbitration agreement, and (3) whether they want to create a separate arbitration agreement for those workers likely to be governed by state law rather than the FAA.

The decision, which addressed a category of workers often referred to as “last leg” or “last mile” delivery drivers, is the latest in a series of Supreme Court rulings in recent years that have interpreted the FAA’s transportation worker exemption. The FAA requires courts to enforce most private arbitration agreements, but Section 1 of the Act exempts certain transportation workers who are “engaged in … interstate commerce.”

In a unanimous opinion by Justice Neil Gorsuch, the Court declined to adopt a bright-line rule that for a worker to be covered by the transportation worker exemption, the worker “must either cross state lines or interact with a vehicle that does,” such as by loading or unloading cargo.

Key Takeaways

The Supreme Court’s ruling—and the Court’s interpretation of the FAA’s transportation worker exemption—have significant implications for employers that distribute or transport goods and their existing arbitration agreements with workers.

Employers may wish to evaluate the extent to which they have workers who might be considered “transportation workers” exempt from the FAA.

Second, employers may want to consider whether to add or revise a back-up state choice-of-law provision in their arbitration agreements, as an arbitration agreement that relies solely on the FAA for its enforceability may be unenforceable against exempt workers.

Finally, for those employers with transportation workers, they may want to create a separate arbitration agreement for those workers likely to be governed by state law rather than the FAA, thereby enhancing the likelihood of enforcing the arbitration agreement under state law even if the FAA does not apply.

Ogletree Deakins Arbitration and Alternative Dispute Resolution Practice Group will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution and Trucking and Logistics blogs as additional information becomes available.

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