Though it may sound esoteric, the question of whether “last mile” drivers fall within the Federal Arbitration Act’s transportation worker exemption bears tremendous consequence. If they are exempt, they can’t be compelled to arbitrate under the FAA. If they are not exempt, the answer reverses. In a recent decision, the Eleventh Circuit wedged open the door for employers to establish that these drivers steer clear of the exemption.
As a general matter, the Federal Arbitration Act requires courts to enforce arbitration agreements. The FAA does not apply, however, to employment contracts with “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Workers who fit this so-called transportation exemption cannot be required to arbitrate their claims under the FAA.
In recent years, last-mile delivery drivers have questioned whether last-mile driving qualifies for this exemption, such that they cannot be made to arbitrate under the FAA. Usually, the question turns on the determination of whether last-mile drivers are engaged in interstate commerce. Courts have divided on whether it’s enough for last-mile drivers to deliver goods that have crossed state lines, even if the drivers never do.
On June 22, 2021, the Eleventh Circuit became the latest appellate court to enter the thickening fray, making clear that delivering goods that originate out of state is not enough to trigger the exemption. In doing so, the appellate court propped open the door for last-mile employers to argue that their drivers are not exempt from the FAA and may be mandated to arbitrate under the Act.
The employer in this case, Partsfleet, helps to bridge the last-mile gap. To do so, it contracts with delivery drivers like Curtis Hamrick, a last-mile driver, who pick up goods from local warehouses and deliver them to their final destination. Those contracts require that disputes between Partsfleet and its drivers must proceed in arbitration.
Hamrick later sued Partsfleet for alleged unpaid overtime under the FLSA. Partsfleet moved to compel the matter to arbitration. Resisting, Hamrick argued that he and other drivers fell within the transportation worker exemption, such that they could not be required to arbitrate under the FAA. The district court agreed with Hamrick, reasoning that (1) the drivers transported goods that traveled in interstate commerce, and (2) that transport was the core function of their job.
Hamrick’s victory was short lived. In its recent opinion, the Eleventh Circuit ruled that the district court’s analysis departed from the proper test for the exemption. To unlock the exemption, a worker must be employed in the transportation industry. But that alone isn’t sufficient—the worker must also, “in the main,” engage in the transportation of goods across state lines.
Relying on cases interpreting “interstate commerce” related language in different statutory contexts—namely, the Fair Labor Standards Act and Motor Carrier Act —Hamrick had urged that drivers performing intrastate trips qualified for the FAA’s exemption so long as “they transport items which had been previously transported interstate.” Not so, ruled the Eleventh Circuit, observing that the FAA presented a distinct statutory construct in which exemptions receive narrow construction.
The appellate court also took issue with Hamrick’s focus on goods instead of workers. The FAA’s transportation worker exemption is just that—an exemption “directed at what the class of workers is engaged in, not what it is carrying.” A test that requires workers to actually engage in the transport of goods from one state to another keeps faith with that statutory language by (1) maintaining the link between “workers” and “engaged in interstate commerce”; and (2) defining that “residual phrase . . . consistently with the other transportation workers mentioned in the exemption.”
Because the district court did not apply the proper test, the Eleventh Circuit remanded for fact finding on whether Hamrick, in his work as a last-mile driver, was employed in a transportation industry that actually engages in interstate commerce.
For last-mile businesses with operations in the Eleventh Circuit (which embraces Alabama, Florida, and Georgia), this decision is critically important. If last-mile drivers cannot establish they are employed in a transportation industry that actually engages in interstate commerce (i.e., transporting goods across state lines), then their promises to arbitrate their claims can be enforced under the FAA. The FAA’s transportation worker exemption will not apply.
Outside of the Eleventh Circuit, the decision still matters. While not binding on other courts, the decision can be cited as persuasive authority. Moreover, the decision—which aligns with Wallace v. Grubhub Holding, Inc., 970 F.3d 798 (7th Cir. 2020), but breaks with decisions issued by the First and Ninth Circuits—inches this important issue closer to the type of split that might command attention from the Supreme Court.