In a Dec. 22, 2025 opinion in the case Silva v. Schmidt Baking Distribution, LLC, 162 F.4th 354 (2d Cir. 2025), the Second Circuit Court of Appeals joined the Third, Ninth, and Tenth Circuit Courts of Appeal in interpreting the interstate transportation worker exemption to the Federal Arbitration Act (FAA), 9 U.S.C. §1, as including so-called “last-mile” delivery drivers. This exemption, found in §1 of the FAA, excludes from the scope of the FAA agreements to arbitrate disputes arising from “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Workers who fall within the scope of this exemption can avoid contractual obligations to arbitrate disputes relating to their work. Workers who do not qualify for the exemption might be compelled to arbitrate if their employers require them to sign an arbitration agreement as a condition of employment. The §1 exemption for workers engaged in foreign or interstate commerce has given rise to various judicial rulings in recent years and, more recently, a circuit split. In a 2019 decision in a case called New Prime Inc. v. Oliveira, 586 U.S. 105 (2019), the Supreme Court ruled that the §1 exemption excludes from the FAA both direct employer-employee relationships and independent contractor relationships so long as those relationships involve the type of work enumerated in the text of the statute. Thus, structuring a relationship in the form of an independent contractor agreement does not avoid the §1 exemption if the work being performed involves transportation in foreign or interstate commerce. In a 2022 decision entitled Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), the Supreme Court interpreted the scope of the clause “engaged in foreign or interstate commerce” in the §1 exemption. The employee in Southwest Airlines was an airline ramp supervisor who frequently loaded and unloaded baggage but was never required to cross a border. The employee argued that any employee of an enterprise involved in foreign or interstate commerce falls within the scope of the §1 exemption while the employer argued that only employees actually required to cross state or international borders qualify. The Supreme Court rejected both of these arguments and held that workers “directly” or “actively” “engaged in transportation” of “goods across borders” qualify for the §1 exemption. In a 2024 decision in a case called Bissonnette v. LePage Bakeries Park St., 601 U.S. 246 (2024), the Supreme Court vacated a ruling by the Second Circuit rejecting application of the §1 exemption to a worker whose employer was not engaged in the transportation industry. The employer in Bissonnette argued that the §1 exemption did not apply because it was a business operating in the bakery industry, not the transportation industry. The Second Circuit affirmed an order by the District Court rejecting application of §1 and dismissing the Brissonnette case in favor of arbitration. Although the Second Circuit later granted rehearing to consider the impact of the Supreme Court’s ruling in Saxon, it ultimately adhered to its prior ruling dismissing Brissonnette. The Supreme Court vacated and reversed, holding that the language of §1 is focused on the nature of the work performed by the worker, not the industry of the employer. More recently, a circuit split has emerged regarding whether last-mile delivery drivers qualify for the §1 exemption. The Third, Ninth, and Tenth Circuits have recently issued decisions concluding that last-mile delivery workers do qualify for the exemption. See Adler v. Gruma Corp., 135 F.4th 55, 69 (3d Cir. 2025); Rittmann v. Amazon.com, Inc., 971 F.3d 904, 919 (9th Cir. 2020); Brock v. Flowers Foods, Inc., 121 F.4th 753, 764 (10th Cir. 2024), cert. granted sub nom. Flower Foods, Inc. v. Brock, 146 S. Ct. 327 (2025). But in its 2022 decision in Lopez v. Cintas Corporation, the Fifth Circuit Court of Appeals reached a contrary decision. Lopez v. Cintas Corp., 47 F.4th 428, 431 (5th Cir. 2022). These decisions regarding last-mile delivery drivers contrast with decisions holding that rideshare and food-delivery drivers do not qualify as transportation workers engaged in interstate commerce. See Brock, 121 F.4th at 763, citing Cunningham v. Lyft, Inc., 17 F.4th 244, 253 (1st Cir. 2021); Immediato v. Postmates, Inc., 54 F.4th 67, 78 (1st Cir. 2022); Singh v. Uber Techs., Inc., 67 F.4th 550, 560 (3d Cir. 2023); Wallace v. Grubhub Holdings, Inc., 970 F.3d 798, 802–03 (7th Cir. 2020); Capriole v. Uber Techs., Inc., 7 F.4th 854, 863–64, 866–67 (9th Cir. 2021). With this backdrop of precedent interpreting the §1 exemption and the circuit split regarding last-mile delivery drivers, the Silva case presented a slight twist for the Second Circuit to consider: The defendant in Silva, a bakery products distributor, required each of its truck drivers to incorporate as their own business. The distributor then entered into separate contracts with each truck driver’s corporation, including provisions requiring arbitration of all disputes. When two of the commercial truck drivers brought employment claims, the District Court granted motions by the distributor to compel arbitration and stay litigation. The truck drivers appealed to the Second Circuit arguing that the order compelling arbitration should be vacated because their contracts were “contracts of employment” that were excluded from the scope of the FAA pursuant to the §1 exemption. Recognizing the issue in Silva as one of first impression in the Second Circuit, the panel ruled that the contracts at issue were contracts of employment even though they were executed by the truck drivers in their capacities “as presidents of their respective corporations.” The Second Circuit rejected the distributor’s argument that the contracts at issue were “akin to ‘franchisor-franchisee’ or ‘supplier-distributor’ relationships” that should be interpreted as falling outside the scope of the §1 exemption. Disregarding form and looking to the substance of the transactions, the Second Circuit found that the truck drivers in Silva were clearly transportation workers and the contracts in question called for the provision of the type of truck-driving work that Congress intended to include with the scope of the exemption set forth in §1 of the FAA, regardless of the fact that contracts took the form of agreements between corporations. With the Silva ruling, the Second Circuit joins with the Third, Ninth, and Tenth Circuits in concluding that last-mile delivery drivers qualify as transportation workers engaged in interstate commerce. The split between these circuits and the Fifth Circuit likely will be resolved by the Supreme Court given its grant of certiorari in the Fifth Circuit’s decision in Brock v. Flowers Foods, Inc. At the time of publication, the appeal in that case is currently set to be heard by the Supreme Court in March 2026. The Silva ruling is a reminder to practitioners that despite the strong policy in favor of enforcing arbitration agreements, the scope of enforcement under the FAA is not unlimited and courts are not afraid to overlook form and analyze substance to interpret the text of the FAA as precluding enforcement of arbitration contracts in cases involving transportation related workers. The scope of such limitations on enforcement can and will have significant impacts on employers, even where those employers are not directly involved in the transportation industry. The claims in Silva and the other last-mile cases were brought as class actions. Interpreting the §1 exemption to cover these types of claims would result in these cases proceeding under ordinary class procedures in federal court, whereas interpreting the exemption the other way would result in these cases being directed to arbitration. Michael James Maloney is an attorney and arbitrator in New York, NY. He focuses on dispute resolution in federal and state courts and in domestic and international arbitration forums.