Should independent contractors in the transportation industry be exempt from mandatory arbitration clauses in their work agreements? The US Supreme Court will soon decide the issue in an upcoming case that has garnered interest from both users of independent contractors and state officials.
Attorneys general in 14 states and the District of Columbia — along with one US senator — have weighed in against enforcing such arbitration clauses for transportation workers. Meanwhile, groups such as the US Chamber of Commerce and Society for Human Resource Management have filed friend-of-the-court briefs arguing the opposite.
The Supreme Court already decided 5-4 in May to uphold arbitration agreements in employment contracts overall [1]. The move was lauded as a benefit to employers, including those in the contingent workforce. The lawsuit now coming before the Supreme Court — New Prime Inc. vs. Dominic Oliveira — centers only on arbitration agreements in work contracts for independent contractors in the transportation industry.
While the Federal Arbitration Act, enacted in 1925, provides for the enforcement of arbitration clauses in contracts, it specifically excludes workers in the transportation industry.
In this case, Oliveira was a truck driver who signed an independent contractor agreement with New Prime Inc. Oliveira later sued the company on a class-action basis claiming failure to pay minimum wage and misclassification as an independent contractor, according to the Massachusetts Attorney General’s Office. Other claims included New Prime taking unfair or illegal deductions that sometimes cut his pay to none at all.
Court documents in the case quote the Federal Arbitration Act as not applying to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
Business groups argue the wording does not include independent contractors. And a friend-of-the-court brief by the US Chamber of Commerce and SHRM says if the court decides otherwise, “untold thousands of arbitration agreements would be called into question.”
Attorneys for Oliveira argue the act’s wording does exclude independent contractors from being contractually required to settle disputes through arbitration.
“While the word ‘employee’ in 1925 had multiple common meanings, the phrase ‘contracts of employment’ had only one: agreements to perform work,” Oliveira’s attorneys wrote in a court filing. “The employment status of the worker was irrelevant.”
Oral arguments in the case are scheduled for Oct. 3.
Already, the US Court of Appeals for the First Circuit sided with Oliveira. And the attorneys general argue mandatory arbitration will take away access to court for transportation workers such as truck drivers.
“Forced arbitration denies workers their day in court,” Massachusetts Attorney General Maura Healey said. “Federal law protects truck drivers and companies cannot strip these workers of their rights.”
US Sen. Sheldon Whitehouse, D-RI, also filed a friend-of-the-court brief against the law.
“Over the past decade, a predictable conservative majority of the Supreme Court has handed down an accommodating string of 5-4 decisions closing off ordinary citizens’ pathways to the courtroom,” Whitehouse wrote. “Corporate victories at the Supreme Court have undermined civil litigants’ constitutional right to have their claims heard before a jury of their peers, and have whittled to a nub the protective role courts and the jury system were designed to play in our society.”
States and other jurisdictions with attorneys general opposing mandatory arbitration in employment contracts for transportation workers include California, Connecticut, the District of Columbia, Illinois, Maryland, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Vermont, Virginia, and Washington.