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June 8, 2026
U.S. Supreme Court severely limits the ability to compel arbitration with "last-mile workers" under the Federal Arbitration Act.
The Supreme Court rejects a bright-line rule that would only exempt workers who personally cross state lines, instead ruling that local, intrastate "last-mile" delivery workers fall under the FAA’s transportation worker exemption if their duties form part of a continuous interstate journey for the goods originating out of state and the last-mile delivery is part of that continuous supply chain, regardless of whether the driver actually crosses state lines.
The Federal Arbitration Act (“FAA”) generally requires courts to enforce private, valid arbitration agreements. However, Section 1 of the FAA carves out “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” In recent years, the Supreme Court has addressed this exemption three times. First, in 2019, the Court held that “contracts of employment” for purposes of the FAA exemption includes independent contractor agreements. Second, in 2022, the Court held that an airline worker who unloaded and loaded cargo fell within the exemption even though the worker was not part of the flight crew or otherwise crossed state lines. Third, in 2024, the Court clarified that a worker need not be directly employed in the “transportation industry” for the exemption to apply; rather, the analysis turns on whether the work played a direct and necessary role in the free flow of goods across borders.
On May 28, 2026, the Court decided another burning question that primarily impacts “last mile” drivers: in order for the exemption to apply, does the worker have to either cross state lines or interact with a vehicle that does? The Court unanimously answered “no.” Writing for the Court, Justice Gorsuch reasoned that neither the statutory language nor prior case law supported a differing conclusion. Importantly, the Court’s decision made clear that the exemption could apply and, therefore, further analysis is always necessary to determine whether the exemption applies based on the specific facts of the dispute.
As a result of the Court’s decision, employers cannot rely solely on the fact that a “last mile” driver did not cross state lines or interact with a vehicle from another state to compel arbitration. Moving forward, employers should consult with a Hill Wallack attorney to determine whether the FAA’s exemption applies to a specific dispute that is subject to arbitration, as well as to determine whether the arbitration agreement is otherwise enforceable under applicable state law.
