January 31, 2019, Trial News
SCOTUS rejects forced arbitration of independent contractor’s claims against trucking company
In a unanimous 8-0 decision, the U.S. Supreme Court has ruled that an interstate trucking company may not compel arbitration of a truck driver’s claims because they constitute a dispute involving a transportation worker’s “contract of employment” and thus are exempted under §1 of the Federal Arbitration Act. Attorneys described this decision, which affects a large segment of transportation workers, as an important victory for workers seeking to protect their rights in the courts.
In a unanimous 8-0 decision, the U.S. Supreme Court has ruled that an interstate trucking company may not compel arbitration of a truck driver’s claims because they constitute a dispute involving a transportation worker’s “contract of employment” and thus are exempted under §1 of the Federal Arbitration Act (FAA). The Court rejected the defendant’s argument that the FAA exemption does not cover the driver because he was an independent contractor, finding ample evidence that when the FAA was enacted in 1925, the term contract of employment was understood to refer to agreements with workers, not only employees. (New Prime Inc. v. Oliveira, 2019 WL 189342 (U.S. Jan. 15, 2019).) Attorneys described this decision, which affects a large segment of transportation workers, as an important victory for workers seeking to protect their rights in the courts.
As Trial News previously reported, Dominic Oliveira, an independent contractor for New Prime, sued the interstate trucking company in federal court in Massachusetts for failing to pay truck drivers minimum wage. Oliveira brought a class claim for breach of contract or unjust enrichment and alleging that New Prime violated the Fair Labor Standards Act and the Missouri minimum wage statute. New Prime moved to compel arbitration under the FAA, which Oliveira argued did not apply to his work contracts. The district court denied New Prime’s motion in 2015, and the First Circuit affirmed in 2017.
The Supreme Court certified two questions for review when it granted certiorari: whether courts or arbitrators should determine the FAA’s applicability and what transportation worker agreements are covered by the §1 exemption. In October, oral arguments focused primarily on the second issue and whether independent contractors fall under the FAA exemption.
Justice Neil Gorsuch, writing for the unanimous Court, noted that before ordering arbitration in this context, courts must first determine whether the §1 exemption applies: “The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the [FAA] authorizes a court to stay litigation and send the parties to an arbitral forum.” The Court rejected New Prime’s argument that arbitrators should make this determination because the employment agreement in question delegated questions of arbitrability to them. Delegation clauses are enforceable under FAA §§3 and 4, but under the statute’s “terms and sequencing,” that inquiry must take place after an analysis of §1, an “antecedent statutory inquiry” appropriate for the courts.
Turning to the second question, the Court pointed to early twentieth-century dictionaries, case law, and state and federal statutes, which did not distinguish between employees and independent contractors. The Court also cited evidence supporting Oliveira’s position that Congress “used the term ‘contracts of employment’ in a broad sense to capture any contract for the performance of work by workers.” Citing New Prime’s failure to “explain away” this record, the Court found that the FAA’s §1 exemption applies and affirmed the First Circuit. When Congress enacted the FAA, the Court wrote, “the term ‘contracts of employment’ referred to agreements to perform work. No less than those who came before him, Mr. Oliveira is entitled to the benefit of that same understanding today.”
Justice Ruth Bader Ginsburg concurred, agreeing with the decision but noting that to meet a statute’s “remedial purpose,” statutory language may need to be interpreted flexibly to reflect “changing times and circumstances.” Justice Brett Kavanaugh did not take part in the decision.
Oakland, Calif., staff attorney Jennifer Bennett of Public Justice, who argued on Oliveira’s behalf, applauded the decision for its positive impact on transportation workers. “We are so proud that Dominic Oliveira’s long fight to have his claims heard in a court of law has been vindicated by the Supreme Court. This ruling is a huge step forward for truck drivers and will enable so many drivers like Dominic, who are not being paid what the law requires, to go to court and fight for their rights.”
Dallas attorney Gerson Smoger, one of the authors of an amicus brief that the American Association for Justice filed in support of Oliveira, agreed that the decision will significantly impact the transportation industry. “Most truck drivers are independent contractors, so this decision is a huge deal for the industry. Think about the possible consequences of a ruling the other way that would have pushed these workers into forced arbitration: How could long-distance truck drivers realistically pursue claims under arbitration agreements that might require them to use a venue across the country? The Court’s ruling is a significant victory for these workers, and the first decision in a long time that has gone against corporations on the issue of forced arbitration.”