The US Supreme Court ruled Tuesday that a trucking company cannot force arbitration in a class-action case alleging it failed to pay lawful wages to independent contractor truck-driver apprentices. This means legal disputes between carriers and independent contractors cannot be forced into arbitration even if their contractor agreements include an arbitration clause, Commercial Carrier Journal reported.
The 1926 Federal Arbitration Act established that arbitration is mostly a binding agreement, but there are exceptions, particularly for transportation workers.
The case is New Prime Inc. v. Oliveira. Driver Dominic Oliveira argued his situation with interstate trucking company New Prime was an included exception to the 1926 law, and the Supreme Court agreed, meaning he has the ability to pursue his original lawsuit in court rather than via a third-party arbitrator.
In his class-action lawsuit, Oliveira argued that New Prime may call its drivers independent contractors, but in reality treats them as employees and fails to pay the statutorily due minimum wage. Oliviera’s contract, which labeled him an independent contractor, instructed that any disputes arising out of the parties’ relationship should be resolved by an arbitrator. In response to Oliveira’s complaint, New Prime asked the court to invoke its statutory authority under the act and compel arbitration according to the terms found in the parties’ agreements.
The court wrote that Congress meant to exempt all transportation workers from the Federal Arbitration Act.
“When Congress enacted the Arbitration Act in 1925, the term ‘contracts of employment’ referred to agreements to perform work,” Justice Gorsuch wrote in the court’s opinion. “No less than those who came before him, Mr. Oliveira is entitled to the benefit of that same understanding today.”
In its decision, the court held that before enforcing a mandatory arbitration clause between a trucking company and its independent contractor-driver, it must be determined whether the Federal Arbitration Act’s exclusion of certain agreements would exempt enforcement under Federal law, Michael Droke, a labor and employment attorney for international law firm Dorsey & Whitney told Staffing Industry Analysts in a statement. The FAA specifically exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
“Justice Gorsuch’s decision emphasizes the literal statutory interpretation of the court,” Droke said. “The opinion repeatedly emphasized the importance of sequencing decisions: Does the FAA apply, or is this agreement exempt? Only if the answer is ‘yes’ will the court force the case to arbitration.”
Companies have used independent arbitration clauses to cut back on class-action lawsuits. In September, the US Court of Appeals for the Ninth Circuit ruled Uber drivers must have their independent contractor misclassification claims heard through arbitration.