First Circuit Provides Additional Guidance on FAA’s Transportation Worker Exception

The First Circuit Court of Appeals has followed up on its recent jurisprudence outlining the standards for the Federal Arbitration Act’s “transportation worker exception,” as we previously posted, by applying its recently delineated standards to hold that individuals who purportedly spent at least 50 hours a week driving goods within a single state were within the scope of the exception.

Margarito Canales and Benjamin Bardzik contracted with a subsidiary of Flowers Foods Inc. Under that contract, Canales and Bardzik owned the rights to three routes in Massachusetts along which they delivered baked goods to stores.

Canales and Bardzik claimed that they were improperly classified as independent contractors and thereby wrongly denied wages and overtime. Flowers Foods and its subsidiaries sought to compel arbitration under the FAA in response to Canales’ and Bardzik’s claims. The district court held that Canales and Bardzik were within the transportation worker exception and thus declined to compel arbitration. Flowers Foods appealed.

The First Circuit affirmed. It rejected the arguments that (1) Canales and Bardzik could not invoke the exception because they were not in the transportation industry and (2) the facts established that Canales and Bardzik were business owners. The court concluded that both arguments were precluded by its recent decision in Fraga v. Premium Retail Services Inc., which noted that the inquiry for determining whether the exception applies is focused on what the worker does, not in which industry the worker is engaged, and recognized that workers who frequently engage in transportation activities can fall within the scope of the exception even if they perform other responsibilities. In this case, the record established that Canales and Bardzik spent a minimum of 50 hours per week driving their delivery routes to deliver goods. They were therefore within the scope of the exception and arbitration could not be compelled under the FAA.

Canales v. CK Sales Co., No. 22-1268 (1st Cir. May 5, 2023).