SCOTUS Defines Interstate Transportation Under the FAA
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MAY 28, 2026 |
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Quick Look
- The test for determining participation in the interstate transportation of goods under the Federal Arbitration Act is whether the worker is an integral part of an interstate commercial journey.
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Discussion
In Flowers Foods, Inc. v. Brock, the U.S. Supreme Court said that employees may be involved in interstate commerce for purposes of the Federal Arbitration Act (FAA) if they participate in some aspect of the interstate transportation of goods, even if the actual employees themselves do not travel interstate.
Here, an employee working for a franchise distributor picked up baked goods from a warehouse in Colorado and delivered them to local stores — all without ever crossing state lines. When the employee sued the employer for allegedly underpaying him, the employer tried to enforce his arbitration agreement. However, the employee claimed he was exempt from the FAA and therefore couldn’t be compelled to arbitrate.
The FAA generally requires courts to enforce arbitration agreements. However, Section 1 of the FAA carves out an exception for workers whose employment contracts involve “interstate commerce,” meaning the movement of goods or people across state lines. The Supreme Court unanimously said that a worker doesn’t have to physically cross state lines, or even touch a vehicle that does, in order to be “engaged in interstate commerce.” What matters is whether the worker plays a direct, active, and necessary role in an unbroken chain of commerce that moves goods from one state to another. Because the employee’s deliveries were the final leg of an interstate journey that began at out-of-state bakeries, he qualified for the exemption, meaning that his claims could not be forced to arbitration.
In this case, the Court resolved a split of authority between Circuit Courts that either said interstate commerce involves a person crossing state lines or a person who was involved at some point in the continuous transportation of interstate goods. Looking at precedent, the Court found there to be a history of workers and vehicles operating entirely within one state but still being considered as part of interstate commerce when they are a necessary link in a cross-border delivery chain. The Court used a simple hypothetical: if three different drivers each handle one leg of a delivery crossing state lines, it would be absurd to say only the one who crosses the border is “engaged in interstate commerce.”
The Court did not resolve every question about who qualifies for the FAA Section 1 exemption. For example, the Court noted, but did not decide, whether the exemption applies differently when a worker operates through a business entity, or when a worker actually purchases and resells goods rather than simply transporting them. Those questions remain open for future cases. For now, the key takeaway is that crossing a state line is not the test. Instead, what matters is whether the worker is an integral part of an interstate commercial journey. This means that certain employees may be exempt from employer arbitration agreements based on their involvement in interstate transportation. These employees may still be subject to arbitration agreements, but only based on state laws rather than the FAA, which is significant because state arbitration laws may vary from the provisions of the FAA. Employers should consult with legal counsel on managing these situations.
Action Items
- Review arbitration agreements with legal counsel in the context of participation in interstate commerce to determine enforceability.
Third Circuit: FLSA Does Not Recognize Overtime Gap Time Claims
On June 3, 2026, the Third Circuit Court of Appeals ruled in Secretary of United States Department of Labor v. Comprehensive Healthcare Management Services, LLC, that the FLSA does not recognize claims for overtime “gap time,” meaning uncompensated straight-time hours worked during a pay period in which the employee also worked overtime. The court held that while the FLSA requires payment of minimum wage and overtime, it does not require employers to pay employees at their regular rate for all straight-time hours before calculating overtime, ultimately declining to defer to longstanding DOL guidance suggesting otherwise. The court also clarified that FLSA overtime exemptions must be given a “fair reading” rather than construed narrowly against the employer, and that an employer’s burden to establish exempt status is satisfied by a preponderance of the evidence, reflecting a deviation from the less demanding standard that other courts have previously applied. While the decision is binding only in the Third Circuit, covering Pennsylvania, New Jersey, and Delaware, employers elsewhere should be aware that the DOL has historically pursued gap time claims aggressively, and the circuit courts remain split on the issue.
Fifth Circuit: Permanent Remote Work is Rarely a Reasonable Accommodation
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All Employers with Employees in LA, MS, and TX
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EFFECTIVE
MAY 8, 2026 |
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Quick Look
- The Fifth Circuit ruled that remote work is not always a feasible accommodation under the ADA.
- Although the employer allowed telework temporarily during the COVID-19 pandemic, this did not mean that the employer permanently changed the job’s essential functions.
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Discussion
In Hayes v. GStek, Inc., the Fifth Circuit Court of Appeals ruled that remote work is not always a feasible reasonable accommodation under the Americans with Disabilities Act (ADA). Here, the plaintiff was an IT systems administrator at a U.S. Army Network Enterprise Center. After returning to the office following the COVID-19 pandemic, the plaintiff was diagnosed with autism, major depressive disorder, and social anxiety disorder. He then requested to telework full time as an accommodation. The employer denied the request because the Army found allowing contractor employees to telework full time was not in their best interests. Eventually, the defendant was allowed to telework two to three days per week. The plaintiff then had a mental breakdown and was terminated for absenteeism. The plaintiff then sued for failure to accommodate, disability discrimination, and retaliation under the ADA.
In reaching its ruling, the court looked to whether the plaintiff could prove: (1) the plaintiff is a qualified individual with a disability; (2) the disability and its consequential limitations were known by the covered employer; and (3) the employer failed to make reasonable accommodations for such known limitations. A plaintiff can show that he is qualified if he shows: (1) he could perform the essential functions of the job in spite of his disability or (2) that a reasonable accommodation of his disability would have enabled him to perform the essential functions of the job. In concluding that permanent remote work was not a reasonable accommodation here, the court focused on several key facts: in-person attendance was an essential function of the plaintiff’s job; other employees working under the plaintiff did not receive teleworking accommodations; Army contractors were not authorized to telework; and although the employer had allowed telework temporarily during the COVID-19 pandemic, that temporary measure did not permanently change the essential functions of the job.
Because the plaintiff could not perform the essential in-person functions of the job while working remotely full time, the court found he was not a qualified individual under the ADA. In any case, the employer satisfied its obligation to provide a reasonable accommodation by allowing telework two to three days per week. As such, the plaintiff was also unable to prove disability discrimination or retaliation.
Action Items
- Review procedures for granting reasonable accommodations in the workplace.
- Review terminations, adverse actions, and accommodation denials with legal counsel.
- Have appropriate personnel trained on workplace accommodation requirements.
Ninth Circuit: Religious Accommodation Undue Hardship is a Factual Determination
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APPLIES TO
Employers with 15+ Employees in AK, AZ, CA, HI, ID, MT, NV, OR, WA, Guam, and the Northern Mariana Islands
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EFFECTIVE
MAY 6, 2026 |
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Quick Look
- Undue hardship under Title VII of the Civil Rights Act may include nonmonetary costs, such as health and safety costs and operational burdens.
- Whether an accommodation constitutes an undue hardship is a factual determination.
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Discussion
In Williams v. Legacy Health, the Ninth Circuit Court of Appeals said that real and substantial hardship under Title VII of the Civil Rights Act may include nonmonetary costs, such as health and safety costs and operational burdens. In applying this standard, it said that each accommodation does not need to be individually evaluated if no accommodation is possible without causing substantial harm, and that the information used to evaluate the potential undue hardship at the time, rather than information in hindsight, is what is relevant. A key aspect of the court’s evaluation was that the employer provided substantial evidence to support its undue hardship position based on this standard.
In this case, a regional hospital system employer introduced a mandatory COVID-19 vaccination policy in August 2021 in response to the surge caused by the Delta variant. Employees who worked at one of the employer’s medical centers, including nurses, respiratory therapists, physician assistants, and technicians, applied for religious exemptions from the vaccine requirement. The employer denied all of their requests, placed them on administrative leave, and ultimately terminated most of them. The employees then filed suit, claiming religious discrimination under both Title VII and Washington state law.
Title VII of the Civil Rights Act requires employers to make reasonable accommodations for employees’ sincerely held religious beliefs, unless doing so would cause the employer “undue hardship.” For many years, courts interpreted this loosely, finding that even a small or minimal cost to the employer was enough to excuse them from accommodating a religious belief. However, in 2023, the Supreme Court raised the bar in Groff v. DeJoy, ruling that undue hardship must be “substantial in the overall context of the employer’s business.”
Here, the Ninth Circuit found that the employer clearly met the Groff standard. The employer presented strong evidence that, at the time it denied the exemptions, allowing unvaccinated workers to remain in close contact with patients and colleagues posed serious and realistic risks, not just theoretical ones. These risks included: (1) employees becoming ill and creating staffing shortages; (2) spreading infection to other healthcare workers; and (3) transmitting COVID-19 to already vulnerable patients with preexisting conditions. The employer also presented expert evidence showing that alternative safety measures like masking and regular testing were not adequate substitutes for vaccination in a hands-on healthcare environment. Importantly, the court emphasized that “undue hardship” doesn’t have to mean financial hardship alone; health and safety costs count too, and in this case, they were decisive.
The employees argued that the employer issued blanket denials without truly considering individual accommodation options and therefore shouldn’t be able to claim undue hardship. The court rejected this, explaining that if no accommodation is possible without causing substantial harm, an employer doesn’t have to go through the motions of evaluating each one individually. The employees also argued that the employer relied on outdated, pre-vaccine data and that other hospitals had successfully granted religious exemptions. The court dismissed both points, noting that employers are judged on the information available to them at the time of their decision, not in hindsight, and declaring that what other hospitals did is irrelevant — the analysis is specific to this employer’s own circumstances and patient population.
Ultimately, the Ninth Circuit upheld the lower court’s ruling that the employer would have faced undue hardship to accommodate the requests. Because the employer provided substantial evidence that accommodating the unvaccinated employees would have posed a substantial risk to patient safety, staff health, and its core mission of providing quality healthcare, it was legally justified in denying the religious exemptions, even if that meant terminating the employees who refused vaccination. The court made clear that this was a fact-specific determination, and the employer’s detailed, evidence-based showing met what the law required.
Action Items
- Have legal counsel evaluate undue hardship denials of religious accommodation to ensure compliance with applicable standards.
- Maintain appropriate documentation supporting undue hardship determinations.
- Have appropriate personnel trained on managing religious accommodation requests.
Tenth Circuit: One Racial Sensitivity Training Was Insufficient to Claim Discrimination
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Employers with 15+ Employees in CO, KS, NM, OK, UT, and WY
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EFFECTIVE
MAY 11, 2026 |
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Quick Look
- A single racial sensitivity training by itself is insufficient to support a discrimination claim.
- Employers should consider including admonitions in racial sensitivity training to support appropriate treatment of such trainings.
- Speculation about potential future harm is insufficient to show actual adverse treatment sufficient to create a discrimination claim.
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Discussion
In Young v. Colorado Department of Corrections, the Tenth Circuit Court of Appeals said that one racial sensitivity training without any factual allegations of how it negatively impacted his terms and conditions of employment was insufficient for an employee to claim discrimination.
Here, a White employee of the Colorado Department of Corrections was required to attend a racial sensitivity training program. He found the training deeply offensive, believing it made sweeping, negative generalizations about White people and that it created a discriminatory work environment against him. He sued under Title VII of the Civil Rights Act and a related federal statute, claiming the training constituted racial harassment and that the hostile environment it created ultimately forced him to quit.
The Tenth Circuit acknowledged that Title VII’s protections against racial discrimination apply to all races, including White employees. However, to win a “hostile work environment” claim, an employee must meet an extremely high standard. The workplace must be so filled with discriminatory intimidation, ridicule, and insult that it fundamentally changes the terms or conditions of employment. An environment that is merely offensive or uncomfortable does not meet this standard; the conduct must be truly abusive and pervasive. A few isolated incidents are not enough. The court evaluated whether the employee’s allegations, even when read in the most favorable light possible, met that demanding threshold.
The court examined each of the employee’s specific complaints and found none of them to be sufficient. The glossary used in the training (which included terms like “white fragility” and “white exceptionalism”) was offensive to the employee, but he never explained how it actually affected his job duties. The training’s guidance on running meetings and its recommended videos were similarly objectionable to him, but again, he couldn’t show how they altered his day-to-day work. Notably, in his prior appeal to the Tenth Circuit, the court had previously concluded that the glossary and videos didn’t render the workplace “permeated with abuse.”
The employee also raised five new arguments in this lawsuit, including that future trainings were planned, that he was required to endorse race-based ideology, that supervisors used the training in disciplinary decisions, that the training compromised prison security, and that his employer failed to investigate his complaints. The court rejected each of these as either speculative, unsupported by specific facts, or legally insufficient on their own. Importantly, the training included admonitions that employees didn’t need to change their values or beliefs and should discuss questions and challenges from the training. Given these admonitions, the employee’s general allegations did not plausibly allege a pattern of abuse against White employees who disagreed with the training.
The employee also argued that the hostile environment had effectively forced him to resign. Because the court found he hadn’t established a hostile work environment in the first place, this claim automatically failed as well.
While the court acknowledged that DEI training can, in theory, cross the line into unlawful racial discrimination, it found that the employee’s specific allegations simply did not rise to the level of a workplace “permeated” with discriminatory abuse. He attended a single training session, left four months later, and could not point to concrete ways the training actually changed his working conditions.
Action Items
- Employers may continue to provide racial sensitivity training, but should evaluate the course material, including admonitions, to verify its appropriateness.
- Have DEI programs reviewed by legal counsel for compliance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase
