Background
Rebecca Orr worked as a Seasonal Support Driver for UPS in late 2023, picking up packages from other UPS drivers and delivering them to their final destinations. When she applied, she signed an arbitration agreement stating it was “governed by the Federal Arbitration Act” — unless the FAA “does not apply.” The agreement included a class action waiver, a delegation clause giving the arbitrator authority to decide questions of arbitrability, and a requirement to arbitrate individual PAGA (Private Attorneys General Act) claims.
Orr sued UPS in Riverside County Superior Court, alleging that UPS repeatedly canceled her routes on short notice without the “reporting time pay” she was owed under California’s Industrial Welfare Commission Wage Order — essentially canceling her shifts after she showed up for work. UPS removed the case to federal court and moved to compel arbitration. The central legal question was whether the FAA or the California Arbitration Act (CAA) governed, because the two laws differ in ways that could affect the outcome. Under the FAA, certain transportation workers — including those engaged in interstate commerce — are exempt from the FAA’s coverage under 9 U.S.C. § 1. The CAA has no equivalent exemption.
The district court refused to decide which law applied, reasoning that the result was “the same” under either statute, and compelled Orr’s individual claims to arbitration while staying the class claims. Orr sought a writ of mandamus — a rarely granted, emergency-style order — from the Ninth Circuit, arguing the district court had committed clear legal error by refusing to make the FAA threshold determination.
The Court’s Holding
The Ninth Circuit granted Orr’s mandamus petition and directed the district court to determine, in the first instance, whether the FAA or the CAA provides its authority to compel arbitration. The panel held that the district court committed clear legal error by refusing to make this determination.
The panel relied heavily on the Supreme Court’s 2019 decision in New Prime Inc. v. Oliveira, which held that courts — not arbitrators — must decide whether the FAA’s section 1 exclusion for “contracts of employment” of transportation workers applies before ordering arbitration. That threshold question cannot be delegated to the arbitrator, even if the arbitration agreement contains a delegation clause, because the court’s very authority to invoke the FAA depends on the answer. Here, because UPS’s agreement selected the FAA “unless the FAA does not apply,” the district court had to resolve that contractual question before sending claims to arbitration — and it couldn’t leave that to the arbitrator either.
The court also found the other Bauman factors (governing mandamus relief) weighed in Orr’s favor: she had no alternative remedy because orders compelling arbitration typically cannot be directly appealed under either the FAA or the CAA, and she faced prejudice uncorrectable on appeal if she arbitrated without knowing which law governed — the applicable arbitration rules, discovery rights, and procedural protections could all differ depending on the answer. Judge Miller concurred in the result but wrote separately to express reservations about the Ninth Circuit’s line of precedent permitting mandamus review of arbitration orders at all.
Key Takeaways
- Before compelling arbitration under the FAA, district courts must affirmatively determine that the FAA applies — they cannot skip this step even if they think the result would be the same under state law.
- The FAA’s transportation worker exemption (9 U.S.C. § 1) is a threshold jurisdictional question for courts, not a merits question for arbitrators, and delegation clauses in the arbitration agreement cannot transfer this inquiry to the arbitrator.
- UPS and other delivery companies that hire workers as “Seasonal Support Drivers” or similar roles may face recurring challenges over whether those workers qualify as transportation workers exempt from the FAA.
- California employers whose arbitration agreements select FAA governance “unless the FAA doesn’t apply” should recognize that courts will need to make that determination — which could open the door to FAA exemption arguments by employees engaged in interstate delivery or logistics.
- A writ of mandamus remains an available, if difficult, path for employees seeking to challenge arbitration orders where direct appeal is unavailable and the legal error is clear.
Why It Matters
This decision has practical implications for the tens of thousands of gig-economy and seasonal delivery workers in California who signed FAA-governed arbitration agreements with employers like UPS, FedEx, and Amazon. Whether the FAA or California law governs an arbitration agreement is not a technical footnote: the FAA’s transportation worker exemption means some workers have no obligation to arbitrate at all, and California’s arbitration law has its own set of employee protections (including PAGA carve-outs and a more limited delegation-clause doctrine). By requiring district courts to resolve this threshold question, the Ninth Circuit makes it harder for employers to use arbitration agreements as a one-size-fits-all barrier to litigation before anyone has examined whether the FAA even covers the worker.
For California employment litigators, this decision reinforces the value of challenging the FAA’s applicability at the outset, particularly for clients in transportation, logistics, delivery, and similar industries. Courts that try to sidestep the question — as the district court did here — will find themselves directed to answer it on remand.