The U.S. Supreme Court ruled that disputes between trucking companies and independent contractor drivers cannot be forced into arbitration even when contractor agreements include an arbitration clause.
The unanimous 8-0 ruling (Justice Kavanaugh was recused from the case) issued Tuesday, Jan. 15, settles a legal dispute between the Missouri-based trucking company New Prime Inc. and owner-operator Dominic Oliveira, the lead plaintiff in a class action.
According to Law 360, Mr. Oliveira’s lawsuit against New Prime alleged that the trucking company violated the Fair Labor Standards Act (FLSA) by failing to pay independent contractor drivers the proper minimum wage. He wanted his case heard in court, but New Prime argued that it was bound to arbitration per the clause in his employment contract.
Writing for the court, Justice Neil Gorsuch said that while arbitration clauses are mostly binding, exceptions exist and Mr. Oliveira’s case could be excluded under Section 1 of the Federal Arbitration Act, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from mandatory arbitration.
“When Congress enacted the Arbitration Act in 1925, the term ‘contracts of employment’ referred to agreements to perform work,” Justice Gorsuch wrote. “No less than those who came before him, Mr. Oliveira is entitled to the benefit of that same understanding today. Accordingly, his agreement with New Prime falls within [Section] 1’s exception, the court of appeals was correct that it lacked authority under the act to order arbitration, and the judgment is affirmed.”
The Supreme Court ruling upholds the First Circuit Court’s rejection of New Prime’s appeal in the case and it could have broad implications for the trucking industry, which heavily relies on the independent contractor model. According to Commercial Carrier Journal, New Prime employs more than 5,000 independent contractors.
According to Scotus Blog, the ruling also clarifies how disputes arising from an arbitration case should be handled. New Prime argued that because of the arbitration clause in Mr. Oliveira’s contract, he was bound to have an arbitrator consider the application of the exception. However, the Supreme Court’s ruling calls for a judicial assessment of the objection to arbitration.
“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,” Justice Gorsuch wrote.
The Supreme Court’s ruling was welcomed as a major victory for truckers and other transportation workers alike, especially in light of another recent SCOTUS decision that dealt a serious blow to workers’ rights. In May, the top court ruled 5-4 along party lines to uphold the use of class-action waivers in arbitration agreements, used by many employers as a condition of employment.
“We are so proud that Dominic Oliveira’s long fight to have his claims heard in a court of law has been vindicated by the Supreme Court’s decision today,” a lawyer for the plaintiff told Law360. “Today’s ruling is a huge step forward for truck drivers. This decision will enable so many drivers like Dominic, who are not being paid what the law requires, to go to court and fight for their rights.”