Can workers who never leave a factory’s grounds still be “engaged in interstate commerce”? According to the California Court of Appeal, the answer is yes.
In Doss v. Tesla, Inc. (June 11, 2026, A173210), the First Appellate District held that Tesla’s “yard hostlers” (employees who use tractor trucks to move 53-foot trailers loaded with out-of-state auto parts around the company’s Fremont factory) qualify as transportation workers exempt from the Federal Arbitration Act under 9 U.S.C. § 1. The decision carries significant implications for California employers who rely on arbitration agreements with workers involved in any phase of the movement, handling, or receipt of goods shipped across state lines.
Here is what employers need to know:
Background
Kenneth Doss worked as a yard hostler at Tesla’s Fremont, California manufacturing facility. His primary duties involved driving tractor trucks to move and position 53-foot trailers (containing auto parts shipped from out of state) from parking and docking areas on the factory grounds to warehouse locations where the parts could be unloaded. Doss never left the factory premises, never crossed state lines, and never personally delivered finished vehicles. When Doss filed a putative class action lawsuit alleging various wage and hour violations, Tesla moved to compel individual arbitration under an arbitration agreement Doss had signed as a condition of employment. The trial court denied the motion, and Tesla appealed.
One Court of Appeal Extends the FAA’s Transportation Worker Exemption to the Factory Yard
The FAA generally preempts state laws that would restrict the enforceability of arbitration agreements. However, Section 1 of the FAA exempts from its coverage the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The U.S. Supreme Court has interpreted this exemption narrowly, applying it only to “transportation workers” who play a “necessary role in the free flow of goods.”
The Court of Appeal, however, concluded that Tesla’s yard hostlers fall within this exemption, even though they worked entirely within the confines of the factory. The court reasoned that the hostlers performed “preparatory work necessary” to the unloading of trailers that had traveled interstate, and that this work constituted “a necessary step in the completion of the interstate journey of the auto parts.” Critically, the court emphasized that the goods remained packed in the same trailers that had crossed state lines, making the hostlers’ handling of those trailers essential to completing the delivery. The court further noted that the trailers themselves were “instrumentalities of interstate commerce,” and that a temporary stop in a parking area on the factory grounds did not sever the nexus to interstate transit.
Tesla argued that the auto parts had already “come to rest” at their final destination and were therefore no longer in the flow of interstate commerce. The court declined to adopt a bright-line “come to rest” rule for purposes of Section 1, holding instead that the determination of when interstate commerce ends is a fact-specific inquiry. On the record before it, the court found an insufficient break in the interstate movement to place the yard hostlers’ work outside the scope of the exemption. Notably, the court did not hold that goods can never “come to rest” at a factory or that the concept is irrelevant to the Section 1 analysis; rather, it emphasized that the end point of interstate commerce will “hinge on the specific facts of the case.”
Key Takeaways for California Employers
Scope of the FAA Exemption
The FAA exemption may extend beyond truck drivers and warehouse workers. Under the Doss court’s reasoning, workers who handle instrumentalities of interstate commerce (such as trailers shipped across state lines) may qualify as exempt transportation workers under Section 1, even if they never leave a single facility. However, the decision is from a single appellate district, rests on a specific set of facts, and its broader applicability remains to be tested. Different workplace configurations and job duties may yield different results.
An Evolving Legal Landscape
This area of law continues to develop. Doss follows the U.S. Supreme Court’s recent decision in Flowers Foods, Inc. v. Brock (2026) 608 U.S. __, which held that a worker need not cross state lines or interact with a vehicle that does in order to qualify for the Section 1 exemption. While these decisions reflect an evolving interpretation of the transportation worker exemption, important questions remain, including where courts will draw the line on the “come to rest” issue and how far the exemption extends to workers whose connection to interstate transit is increasingly attenuated. Employers across industries, not just those in the transportation sector, should monitor these developments closely.
Practical Guidance
Doss v. Tesla is a reminder that the enforceability of arbitration agreements in the employment context depends on a complex, fact-intensive interplay of federal and state law. California employers (particularly those in manufacturing, logistics, and distribution) should consult with counsel to assess the potential impact of this decision on their workforce and arbitration programs. Employers may have strong grounds to distinguish Doss where their workers’ duties, the goods at issue, or the logistics chain differ from the circumstances presented in Doss.