For decades, employers could rely upon mandatory arbitration agreements to resolve disputes efficiently and privately, without the risks associated with class-action litigation. This has especially been the case in the transportation and logistics industries, but a shift could be on the way.
This term, the Supreme Court will hear Flowers Foods, Inc. v. Brock, a case that could rewrite where “transportation worker exemption” lands within the Federal Arbitration Act (FAA). Meanwhile, a separate dispute involves the Teamsters intending to use arbitration for challenging UPS’ use of gig-based delivery services. The outcomes of these conflicts could potentially transform how logistics employers must handle labor disputes.
The Flowers Foods Case and the Future of Arbitration
Flowers Foods will determine how far the transportation worker exemption extends and whether local or last-mile delivery drivers are “transportation workers engaged in interstate commerce,” so that they can sidestep mandatory arbitration requirements under federal law. In turn, the case will decide whether this particular group of gig drivers, who are independent contractors, are bound to private arbitration or can file lawsuits in court.
The Supreme Court’s decision could either reaffirm arbitration as an enforceable employer tool for delivery and gig drivers or throw many clauses out, potentially opening the door for class-action lawsuits from last-mile drivers. This will likely result in a slew of test cases filed by couriers, but Flowers Foods isn’t likely to allow rideshare and app-based food delivery drivers to gain an arbitration exemption.
As Bloomberg Law points out, the Ninth, First, and Third Circuits already held that rideshare drivers don’t move passengers or goods as a part of a steady interstate flow, so they’re not exempt. Likewise, the Seventh Circuit determined that Grubhub drivers deliver food that originates in the same state where it’s consumed, so those drivers aren’t exempt either.
Another Wrinkle: Teamsters vs. UPS Over Roadie
Meanwhile, the Teamsters are threatening to use arbitration against UPS over its subsidiaries, Roadie and Happy Returns, which provide freelance drivers for “last mile” deliveries from companies such as Home Depot, Walmart, and Nothing Bundt Cakes. In particular, the Ventura County Teamsters local alleges that UPS is violating their contract by using nonunion gig drivers to avoid paying overtime to its own union drivers.
However, if the Supreme Court’s ruling in Flowers Foods expands the FAA’s transportation-worker exemption, arbitration clauses involving gig and last-mile drivers could lose enforceability. This could push the Teamsters’ UPS-Roadie conflict into courts, but it’s also bad news for employers because losing arbitration as a dispute-resolution mechanism could make many future class-action cases possible in logistics.
Conclusion
The outcomes of both Flower Foods and the UPS/Roadie dispute are poised to turn arbitration into a labor relations battleground. As a result, employers in logistics and who use gig drivers for last-mile deliveries should examine their arbitration frameworks and take stock of which of their delivery drivers might fall under the FAA.
Stay tuned because although “arbitration” doesn’t sound like the most interesting or dramatic subject, the results of these disputes could carry long-lasting, and expensive, implications for businesses.
