Key Points

• California court limits FAA transportation-worker exemption: In Vela v. Harbor Rail Services, the Second Appellate District ruled that maintenance and repair workers in trucking, railroad and other transportation-adjacent industries do not qualify as "transportation workers" under the Federal Arbitration Act.
• Class action waiver enforcement strengthened for support-role employees: The decision draws a clear line between workers who directly move goods in interstate commerce and those who merely support that process, such as mechanics, repair technicians and maintenance crews.
• Employers should act now to review arbitration agreements: Companies in logistics, trucking, rail and related industries should audit their arbitration programs and onboarding procedures to ensure agreements with support-role workers are enforceable under federal law and properly insulated from challenge.

California's Second Appellate District recently issued an important decision that reshapes how employers in logistics, trucking, railroad and other transportation-adjacent industries can defend against wage-and-hour class actions. Fox Rothschild employment litigator Steven Gallagher successfully argued the appeal for Harbor Rail Services of California, Inc.

The May 1, 2026, ruling in Vela v. Harbor Rail Services of California, Inc. holds that maintenance and repair workers whose tasks are temporally and functionally separate from the actual movement of goods do not qualify for the Federal Arbitration Act's (FAA) transportation-worker exemption. This means their arbitration agreements and class action waivers remain enforceable under federal law.

For employers with arbitration programs that apply to support-role workers, this decision is an immediate call to action: review your arbitration agreements, confirm they are enforceable under the FAA, and assess whether your onboarding processes adequately insulate those agreements from challenge.

Transportation Worker Exemption Limited

The decision marks a significant development for employers seeking to enforce arbitration agreements and class action waivers against workers whose jobs support — but do not directly accomplish — the movement of goods in interstate commerce. The opinion holds that railcar maintenance and repair workers do not qualify for the FAA's Section 1 transportation-worker exemption, thereby compelling arbitration and enforcing the class action waiver. The decision also narrows the "contract of employment" theory that plaintiffs have attempted to leverage through business-to-business agreements.

Why This Matters

Over the past several years, plaintiffs' counsel have increasingly invoked the FAA's Section 1 exemption to avoid arbitration and pursue class litigation in California courts. Section 1 exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from the Act's coverage. When a worker falls within this exemption, the FAA does not apply, and California law — far more hostile to class action waivers — governs arbitration agreement enforceability.

The practical stakes are enormous. Under federal law, class action waivers in arbitration agreements are generally enforceable. Under California law, such waivers are potentially unenforceable, and California Labor Code Section 229 can exempt certain unpaid wage claims from arbitration altogether. This disparity creates a massive incentive for plaintiffs' attorneys to characterize as many workers as possible as “transportation workers” — even when those workers never directly move goods across state lines.

Vela puts an important limit on this strategy, making clear that workers who service, maintain or repair the instrumentalities of commerce — without directly participating in the transportation process — cannot escape arbitration by claiming the exemption.

The Facts

Harbor Rail Services of California hired Arturo Vela as a rail freight car repairman in May 2021. His job consisted of inspecting and repairing freight cars at a Pacific Harbor Line (PHL) train yard in Wilmington, California. Railroad companies BNSF and Union Pacific would deliver freight cars to the yard, disconnect their locomotives, and leave the cars withdrawn from service and not usable until they passed inspection. Vela's duties included changing wheels and brake pads, disassembling and reassembling train cars, and welding and fabricating metals for train ladders.

Harbor and Vela signed a mutual arbitration agreement with a class action waiver. Vela later filed a wage-and-hour class action alleging unpaid overtime, missed meal and rest period premiums, and other Labor Code violations. Harbor moved to compel individual arbitration and dismiss the class claims. Vela opposed, arguing that he fell within the FAA's Section 1 exemption as both a “railroad employee” and a “transportation worker.”

The Court's Analysis

The Court of Appeal applied a two-step framework from a recent U.S. Supreme Court's 2022 decision. The courts must first define the relevant “class of workers” based on “the actual work that the members of the class, as a whole, typically carry out.” The second step asks whether that class is “engaged in foreign or interstate commerce.”

The court identified Vela's class as workers who inspected and repaired rail freight cars temporarily taken out of service. The court’s critical finding was that this work was "too far removed from the actual process of transporting goods" to constitute active engagement in transportation. It was only after Vela and his co-workers completed their tasks that the freight cars were returned to active service.

The court drew a clear line between workers who directly move goods and those who merely support others' ability to do so. The court distinguished the cases Vela cited — each of which involved workers who played some role in the actual transportation of goods, such as package delivery drivers and employees who directly supervised shipments.

Broad Implications

The decision's reasoning applies with particular force to mechanics and other maintenance workers in transportation-related industries. The court approvingly cited a recent Ninth Circuit Court of Appeals decision, holding that a truck mechanic who serviced trucks hauling goods across state lines was not a transportation worker because “his connection to interstate commerce was too attenuated.” Together, these decisions establish that maintaining, repairing or servicing vehicles and equipment used in interstate commerce is categorically different from actually transporting goods.

The implications are likely broad. Mechanics at trucking companies, railcar repair technicians, aircraft maintenance workers, warehouse equipment repair personnel, dispatchers who do not supervise shipments, and maintenance crews at ports and rail yards all support the movement of goods without directly accomplishing it. Under Vela, these workers likely cannot claim the transportation worker exemption to avoid arbitration.

The 'Contract of Employment' Issue

Vela also argued he was a “railroad employee” under Section 1 because his employer had a subcontracting relationship with PHL, a railroad company. The court rejected this, holding that the business-to-business service agreement “cannot constitute a 'contract of employment' within the meaning of the section 1 exemption.” Relying on another recent Ninth Circuit's decision, the court held that for a contract to be covered by Section 1, it must have a qualifying worker as one of the parties.

Notably, the court did not reach whether Vela's onboarding documents, read together, constituted a “contract of employment” under Section 1. This means the question remains open for future cases whether a worker qualifies as a transportation worker. Employers who employ actual transportation workers should ensure that arbitration agreements are structured as standalone documents with separate signatures. To avoid arguments that they are part of other contractual documents, they must be clearly separated from documents containing hallmarks of traditional employment contracts such as salary terms, benefits and leave time. Moreover, if they can be rolled out separate from other onboarding paperwork, even a day or so later, that is even better.

Key Takeaways

The Vela decision affirms that the FAA applies to arbitration agreements with maintenance and repair workers in transportation-adjacent industries and that class action waivers under the FAA preempt California's hostility toward such waivers. For employers facing class action litigation from workers who support transportation but do not directly move goods, Vela provides strong, binding California authority to compel arbitration and eliminate class exposure at the outset.

Employers with well-drafted arbitration agreements, clear class action waivers, and thoughtful onboarding procedures are best positioned to defend against wage-and-hour class exposure in California's challenging litigation environment. Vela adds a significant tool to that arsenal.

A Petition for Review was filed in the California Supreme Court on June 10, and the Supreme Court is likely to grant or deny review by August 9, 2026.

For more information, please contact Steven Gallagher at 424.285.7096 or stevengallagher@foxrothschild.com.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.