The United States Supreme Court’s recent track record broadly upholding arbitration agreements hit a major speed bump for transportation companies this week. In New Prime, Inc. v. Dominic Oliveira, the Court held that workers involved in interstate commerce, including both employees and independent contractors, are not covered by the Federal Arbitration Act (FAA). The contract between Mr. Oliveira, a truck driver, and New Prime identified him as an independent contractor and also mandated that any disputes between them be resolved in arbitration, including disagreements “over the scope of the arbitrator’s authority.” When Mr. Oliveira brought a federal class-action lawsuit alleging that New Prime had not properly paid him and other similarly-situated individuals under the Fair Labor Standards Act (FLSA), the company pointed to their agreement and requested that the trial court exercise its authority under the FAA to compel the parties to arbitration. Mr. Oliveira countered that Section 1 of the FAA, which excludes from the Act’s coverage disputes related to transportation workers’ “contracts of employment,” prohibited the court from ordering the parties to go to arbitration. Both the District Court and Appellate Court agreed with Mr. Oliveira, and New Prime appealed the case to the Supreme Court.
In upholding the Appellate Court’s decision in favor of Mr. Oliveira, the Supreme Court focused on the meaning of the phrase “contracts of employment” at the time of the FAA’s passage in 1925. The Court explained that the word “employment” was synonymous with “work” at the time, and thus the term “contracts of employment” was not limited to formal relationships between employers and employees. Rather, it also was understood to include agreements between independent contractors and companies. The Supreme Court held that Section 1 serves to exclude from the FAA’s coverage disputes between independent contractors and the companies for which they perform work in interstate commerce, in addition to disputes between employees and their transportation company employers.
For businesses who employ or contract with interstate transportation workers, New Prime, Inc. v. Oliveira serves as a wake-up call that their arbitration agreements, as construed under the FAA, will not keep suits brought by such individuals out of court. While this case definitely dealt a blow to management, not all hope is lost as transportation companies may look to state arbitration laws as a way to pursue dispute resolution outside of the courts.
As we are continuing to scrutinize this case and its potential impact on our clients, please be on the lookout for a more in-depth analysis of New Prime, Inc. v. Dominic Oliveira next week.
By: Allison R. Wallrapp-McMullan
Allison R. Wallrapp-McMullan is an attorney in the Firm’s Labor and Employment Practice Group. If you have any questions or concerns about this issue or any other matter, please contact Allison directly at 813-223-1099.