September 29, 2026 Legal Scrutiny of Last-Mile Delivery Arbitration Clauses

Manufacturers relying on last-mile delivery drivers may benefit from reviewing arbitration clauses in their contracts.

By Tyler G. Haas

What Recent Developments Are Affecting Arbitration Clauses in Last-Mile Delivery Contracts?

The use of “last-mile” delivery services has continued to grow over the past decade. Armstrong & Associates, Inc. estimates that the U.S. market for “big and bulky” last-mile delivery services had a compound annual growth rate of 10.6% between 2017 and 2025. That market growth has coincided with legal challenges brought by last-mile delivery drivers seeking to avoid mandatory arbitration.

The typical dispute arises under the manufacturer’s contract with the last-mile driver. The driver signs the contract and agrees to deliver goods within a particular territory. The contract includes a mandatory arbitration clause requiring the parties to arbitrate any disputes related to the contract. However, when a dispute arises over the manufacturer’s payments to the last-mile driver, the driver sues the manufacturer in federal court alleging a violation of federal wage laws. The driver may believe that they will receive preferential treatment from a federal judge in a public setting as opposed to an arbitrator in a private setting. In response, the manufacturer files a motion that asks the federal court to enforce the arbitration clause in the parties’ contract and to compel the parties to arbitrate the payment dispute. The driver opposes the manufacturer’s motion and argues that the arbitration clause is unenforceable given the nature of the parties’ contract.

That is what happened in Flowers Foods, Inc. v. Brock, a case that reached the U.S. Supreme Court and resulted in a favorable decision for last-mile drivers on May 28. The Court’s ruling held that certain transportation workers, such as last-mile drivers who handle the intrastate delivery of an interstate goods shipment, may avoid mandatory arbitration even if the workers never crossed a state border or never interacted with a vehicle that did. Whether the Supreme Court’s decision will override a particular arbitration clause in a contract for last-mile delivery services depends on a number of factors.

Key Takeaways

• Last-mile drivers are increasingly suing manufacturers in federal court over payment disputes and challenging manufacturers’ attempts to arbitrate those disputes.
• Last-mile drivers may be exempt from mandatory arbitration even if they only handle the intrastate portion of an interstate shipment.
• Manufacturers that value the ability to arbitrate disputes stemming from last-mile delivery contracts may wish to reassess the terms in those contracts.
• Manufacturers should assess whether the last-mile delivery contract is with a standalone business entity that employs last-mile drivers, whether title to the goods passes to the last-mile driver, and whether applicable state laws can still compel arbitration. 

Enforceability of Mandatory Arbitration Clauses

The threshold enforceability question for arbitration clauses is whether the Federal Arbitration Act (FAA) applies to the parties’ contract. The FAA empowers parties to ask a court to compel mandatory arbitration so long as the arbitration clause is in a contract involving foreign or interstate commerce. For example, a manufacturer that has a valid arbitration clause in a commercial contract with a distributor could potentially compel arbitration of a dispute over that contract if the contract involves goods that will be transported across a state border.

The FAA does not apply to “contracts of employment” for certain workers, including “workers engaged in foreign or interstate commerce.” This “transportation worker exemption” is often litigated to determine whether there is a “contract of employment” between the parties and whether the plaintiff who signed the contract is a worker “engaged in foreign or interstate commerce.”

Between 2019 and early 2026, the U.S. Supreme Court had issued three decisions that helped define the transportation worker exemption (New Prime Inc. v. Oliveira; Southwest Airlines Co. v. Saxon; and Bissonnette v. LePage Bakeries Park St., LLC):

• First, the Court ruled that contracts with independent contractors count as “contracts of employment” under the transportation worker exemption.
• Second, the Court ruled that airplane cargo loaders can be “workers engaged in foreign or interstate commerce” even if they do not accompany the cargo across international or state borders.
• Third, the Court ruled that a worker does not need to be employed by a company in the transportation industry to qualify as being “engaged in foreign or interstate commerce.” On this last point, the Court clarified that workers could qualify for the transportation worker exemption if they are playing “a direct and necessary role” in the “flow of goods across borders.”

The U.S. Supreme Court Amplifies the “Transportation Worker Exemption”

In Flowers Foods, the Court ruled that workers can qualify for the transportation worker exemption even if they do not “cross state lines” or interact with a vehicle that does.

In its analysis, the Court used a hypothetical involving a last-mile driver to show that “a worker who transports goods on an intrastate leg of an interstate journey” can qualify for the exemption and avoid mandatory arbitration given the driver’s role in interstate commerce. The hypothetical poses that there is a bakery in “State B” that wants to sell baked goods to a customer in “State A.” There is a driver who transports the baked goods across the state line from State B to State A. There is a separate last-mile driver who then takes the baked goods from within State A’s border to the customer’s State A headquarters. The Court explained that the last-mile driver who picks up the baked goods in State A and transports them to a customer in State A is still playing a direct and necessary role in getting those goods from the State B bakery to the State A customer.

Practical Considerations for Manufacturers

On its face, the Flowers Foods decision suggests that an arbitration clause in a last-mile delivery contract will likely be unenforceable if the goods being delivered were originally shipped from another state. However, the Court’s opinion flagged, but did not resolve, additional nuances that could still make certain arbitration clauses enforceable. Reassessing last-mile delivery contracts with the following considerations in mind can help manufacturers enhance the enforceability of related arbitration clauses.

Manufacturers that value arbitration as a way to resolve disputes should consider avoiding contracts with last-mile drivers directly, and instead, consider the feasibility of contracting with companies that employ last-mile drivers. While a manufacturer’s contract with a last-mile driver is likely to be interpreted as a “contract of employment,” a manufacturer’s contract with a company that employs multiple last-mile drivers is likely to be interpreted as a commercial contract between two companies. A commercial contract with another company, as opposed to a perceived employment contract with a transportation worker, can contain an enforceable arbitration clause.

Manufacturers that prefer contracting with last-mile drivers directly may consider specific terms for those contracts that might preserve the enforceability of their arbitration clauses.

One contract term that manufacturers are considering involves passing the goods’ title to the last-mile driver upon delivery to that driver. The argument here is that the last-mile driver’s delivery route would be a separate intrastate transaction between the driver and the customer. However, companies considering this term should take care in how it is drafted in the context of the entire transaction. For example, in the case of Porteous v. Flowers Foods, Inc., the U.S. District Court for the District of Oregon found that, despite the manufacturer nominally passing title to the last-mile driver, the “true customers” of the interstate goods under the parties’ distribution contract were the retail stores receiving goods from the last-mile deliveries and not the last-mile driver. The driver’s route to the retail stores was not part of a separate transaction given the “degree of control” that the manufacturer still had over the driver’s deliveries.

Another contract term that is being considered to preserve the enforceability of arbitration clauses is the arbitration clause itself. Many of these clauses identify the FAA as the governing law. Companies are reassessing whether state law should govern the arbitration clause instead of the FAA. The argument is that if the arbitration clause is not enforceable under the FAA, it could still be enforceable under certain state laws. Whether this is a viable strategy remains to be seen.

As courts continue to define the FAA’s transportation worker exemption, manufacturers who value arbitration should continue to monitor those legal developments and evaluate their last-mile delivery contracts with the aim of enhancing the enforceability of their arbitration clauses.

About the Author:
Tyler G. Haas is an associate in Robinson+Cole’s Business Litigation group, whose work involves assisting clients in resolving commercial and regulatory disputes across the country.

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