Independent contractor truck drivers aren’t subject to mandatory arbitration under the federal exclusion for transportation workers, the U.S. Supreme Court ruled Tuesday.
The unanimous ruling in New Prime Inc. v. Oliveira clarified what type of worker the 1925 Federal Arbitration Act applies to. And it opens the door for truck drivers, both employees and independent contractors, to potentially take their complaints directly to court.
Arbitration agreements typically mandate that all disputes be solved by an arbitrator and not in court – including the question of whether the dispute legally belongs in court.
“It is fair to say this decision today will make it more difficult for companies to enforce arbitration agreements, but it doesn’t close the door,” said Braden Core, a partner in the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
Under prior case law, state arbitration laws can also hold sway, Core said. He expects more litigation over exactly what arbitration law will and won’t allow “now that there is a class of workers — owner-operators – that are exempt under federal law.”
“This may be a battleground going forward,” said Core, who attended the oral arguments in the New Prime case at the Supreme Court in October.
Once motor carriers realize they can use state law, they may try to do so more often, he said. If that happens, plaintiffs’ and employees’ attorneys will likely vigorously resist, he said.
The ruling “is it not just about procedure,” according to Ceilidh Gao, staff attorney at the National Employment Law Project. It should have a positive impact on truck drivers and other transportation workers who fall under the act’s exclusion, she said.
Mandatory arbitration “really suppresses claims; it forces people into this private forum that is often less fair, and studies show it’s harder to win there, which means it’s less likely a lawyer will take the case,” Gao said.
Tuesday’s ruling didn’t cover the original lawsuit claim by truck driver Dominic Oliveira that his work for New Prime, a Springfield, Mo., interstate trucking company that specializes in refrigerated, flatbed, tanker and intermodal trucking operations, was that of an employee, not an independent contractor. Instead, it said he could take his claim to court and was not limited to the arbitration process.
New Prime argued that its contract with the driver required that the decision to be made in the arbitration process, not by the courts. And it argued that the phrase used in the Federal Arbitration Act’s exclusion for transportation workers — “contract of employment,” only applied to agreements with employees, not independent contractors.
The U.S. Supreme Court took up the issue to “resolve existing confusion about the Arbitration Act,” wrote Justice Neil Gorsuch in delivering the court’s opinion. “Because courts across the country have disagreed on the answers to these questions, we took this case to resolve them.”
The court’s opinion: “While a court’s authority under the Arbitration Act to compel arbitration may be considerable, it isn’t unconditional.”
And, Gorsuch noted, “The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the Act authorizes a court to stay litigation and send the parties to an arbitral forum.”
‘Terms of employment’
The court took into consideration what the act’s “terms of employment” phrase meant when it was written in 1925. It decided the phrase was not limited to agreements between employers and employees.
New Prime’s general counsel called the loss “disappointing” and told Trucks.com the company will now resume fighting the allegations in the lawsuit in the First Circuit Court.
“As is evident, the high Court held onto principles first laid out nearly 100 years ago,” said Steve Crawford, the company’s top attorney. “We obviously felt that the Court’s ruling should have evolved with the law of business and culture. However, when they can hang on to something tied closer to our founding tenets, they tend to do so.”
In stark contrast to Tuesday’s ruling, last week the U.S. Supreme Court upheld mandatory arbitration in Henry Schein Inc., et al v. Archer & White Sales Inc., a lawsuit that did not include transportation workers. It ruled unanimously that courts can’t ignore an arbitration contract that says an arbitrator gets to decide whether the dispute should be subject to arbitration or be allowed to go to court