The lower court skipped one step - and it cost UPS its arbitration win
A lower court ordered a UPS seasonal driver into arbitration. A federal appeals court just ruled the judge skipped a step that mattered.
On June 9, 2026, the US Court of Appeals for the Ninth Circuit ruled for a former UPS driver in a decision that employers relying on mandatory arbitration will want to read closely.
The court granted Rebecca Orr's petition for a writ of mandamus - a rare order that tells a lower court to fix an error - and required the US District Court for the Central District of California to vacate its order forcing Orr to arbitrate her individual claims against UPS.
Orr worked as a Seasonal Support Driver for UPS in late 2023, collecting packages from other drivers and delivering them to their final stops. When she applied through an online UPS portal, she signed an "Arbitration Agreement/Seasonal Hiring Agreement."
She later sued in California state court, raising five state law claims - several on behalf of three proposed classes - including an allegation that UPS failed to pay Seasonal Support Drivers their required "reporting time pay." She then added a sixth claim under California's Private Attorneys General Act, or PAGA. UPS moved the case to federal court and asked the judge to compel arbitration.
The judge did exactly that, sending Orr's individual claims to arbitration while pausing the class claims. But the court refused to decide one threshold question: whether the Federal Arbitration Act or California's arbitration law governed the agreement. The reasoning was that the "result is the same" under either.
The Ninth Circuit disagreed. Pointing to the Supreme Court's decision in New Prime Inc. v. Oliveira, the panel held that a court, not an arbitrator, must decide whether the FAA's "contracts of employment" exclusion under 9 U.S.C. § 1 applies before sending a case to arbitration. That exclusion covers "seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."
The panel did not decide whether Orr's agreement falls within that exclusion - it said the district court has to take that up first. In a footnote, the opinion flagged a recent Supreme Court case, Flowers Foods, Inc. v. Brock, that addresses the same § 1 issue for employees who deliver packages to their final destination.
Why the unanswered question matters: the court explained that whether the FAA or state law applies could determine which of Orr's wage claims she must arbitrate, which she could take to court, and whether she can even challenge the agreement's class action waiver.
For HR leaders, the signal is in how arbitration agreements are built. Orr's contract named the FAA as the default unless the FAA "does not apply." If it does not apply, a different law steps in - and the court said that switch could change outcomes. There was even a wrinkle: at oral argument, both sides acknowledged the contract pointed to the Ohio Arbitration Act, not California's, if the FAA fell away.
The lead-up was familiar workforce friction. Orr's routes were shortened or canceled the morning of a shift on at least seven occasions. When she asked UPS human resources about a canceled route in mid-December, a representative told her there were not enough packages out for delivery. She received no more assignments for the rest of her employment period, despite repeated inquiries.
The court did not decide whether Orr's claims belong in arbitration. It said only that the district court must determine the legal basis first, with the remaining arbitrability questions to follow. The case now returns there, and the dispute is far from over.
