New Prime, Inc. v. Oliveira: Independent Contractors Now Exempted Under the Federal Arbitration Act
The U.S. Supreme Court recently decided a case with important implications for the transportation industry, New Prime, Inc. v. Oliveira. Under federal law, transportation companies can no longer compel its workers engaged in interstate commerce to arbitrate disputes. However, state laws may still permit arbitration of employment disputes.
Employers in numerous industries have sought to limit employees’ ability to file class or collective action in courts by requiring employees to waive the right to join class or collective actions and require individual arbitration of employment claims. Oliveira, a tractor-trailer driver for New Prime engaged as an independent contractor, sued the company in a proposed class action for improper wage payment based on misclassification of his status. New Prime sought to enforce its arbitration agreement with Oliveira, which Oliveira opposed. The lower courts sided with Oliveira, as did the Supreme Court. The Court held the arbitration agreement not enforceable because of an exemption for “contracts of employment” for interstate transportation workers in Section 1 of the Federal Arbitration Agreement (FAA).
The Court first held that courts, not arbitrators, determine whether Section 1 of the FAA applies to an agreement with a transportation worker. It further held the plain meaning of “employment,” as stated in the “contracts of employment” when the FAA was enacted in 1925, encompassed independent contractors today. Accordingly, the Supreme Court has loosened the restrictions the FAA placed on transportation workers pursuing employment lawsuits — most notably, worker misclassification claims — against companies engaged in interstate commerce. For our transportation clients, this narrow ruling impacts the reliance on federal precedent favoring arbitration to deflect such disputes.
State laws may still permit arbitration of employment disputes between transportation companies and its employees and contractors. Contact Dysart Taylor today to discuss how this ruling may affect your business.
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