U.S. Supreme Court Issues Decision on Applicability of Federal Arbitration Act to Transportation Industry Workers

The United State Supreme Court recently issued a decision with ramifications for employment relationships in the trucking industry. There are generally two types of workers driving in the modern transportation industry, employees and independent contractors. While the former are often company drivers, be it over-the-road or local, the latter often consist of owner-operators and independent, single vehicle or fleet logistics companies. The use of both types of drivers have their place in trucking, though the use of independent contractors was recently noted to be “under siege,” particularly in California, resulting in significant company exposure to wage claims and work-related expenses.

New Prime Inc. v. Oliveira

In New Prime Inc. v. Oliveira, 2019 WL 189342 (U.S. 2019), the Court was asked to enforce an arbitration clause in an independent contractor agreement. In a class action lawsuit in federal court, the truck driver, Dominic Oliveira, argued that New Prime, Inc., denied its drivers lawful wages. New Prime, Inc., argued that Mr. Oliveira’s contract mandated arbitration and invoked the Federal Arbitration Act to enforce the contract clause.

Writing for the court, Justice Gorsuch observed that the Act exempts certain workers from its scope, notably “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” New Prime, Inc., argued firstly that the applicability of the Act was for an arbitrator to decide and secondly that the “contracts of employment” referred to in the Act did not encompass independent contractor agreements.

The Court disagreed on both counts, holding that a court must first determine for itself if the Act applies before staying litigation and mandating arbitration and that the term “contracts of employment” referred to all agreements to perform work, including those of independent contractors in the transportation industry. As a result, the lower court’s refusal to compel arbitration because it lacked authority to do so under the Act was affirmed.

Justice Kavanaugh took no part in the consideration of the case, and Justice Ginsburg authored a concurring opinion.

 

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