New Prime Inc. v. Oliveira
In a case closely watched by the trucking industry, the U.S. Supreme Court will decide whether the Federal Arbitration Act exemption for interstate transportation workers applies to independent contractors. Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
The justices heard oral arguments in October 2018 in a class action accusing New Prime Inc. of failing to pay independent contractor truck-driver apprentices a proper minimum wage. The high court granted certiorari in February 2018.
New Prime is seeking to overturn what it has described as a remarkably overbroad May 2017 First Circuit ruling that the applicability of the Section 1 exemption is always a question for the court and that the term “contracts of employment” should be read to also include independent contractor agreements, like the one that plaintiff Dominic Oliveira signed with New Prime when he joined its apprentice program.
“If the Supreme Court concludes that independent contractors are subject to the FAA exemption, meaning that claims from independent contractors are not subject to arbitration under federal law, it would create a tidal wave of litigation against transportation companies that hire independent contractors and likely mark the end of independent contractors in the industry,” said Brad Hughes, a transportation litigation attorney at Clark Hill PLC.
New Prime has argued that Oliveira, a former apprentice, could not sue the company in court for allegedly failing to pay minimum wage, because of an arbitration clause in a contract he signed to be an independent contractor.
Oliveira, meanwhile, has countered that the First Circuit’s decision was unremarkable and should be left intact, saying it simply holds that before relying on the FAA to compel arbitration, a court must determine whether the act even applies. Furthermore, the Supreme Court has made very clear that laws are to be interpreted according to their ordinary meaning at the time they were passed, according to Oliveira.
“The court’s ruling in New Prime Inc. v. Oliveira is going to determine the course of relations between the transportation industry and the individuals that they hire for the foreseeable future, and the outcome is anxiously awaited by all in the industry,” Hughes said.
Plaintiffs attorneys have said that because protections for workers largely hinge on employment status mostly because the current outsourcing craze wasn’t an issue when such foundational protections were enacted economic security for the middle and working class depends on strong application of employment laws.
“Courts like the First Circuit in New Prime have crafted thoughtful checks on corporations’ aggressive use of arbitration agreements,” said Jahan C. Sagafi, a partner with plaintiffs firm Outten & Golden LLP.
The case is New Prime Inc. v. Dominic Oliveira, case number 17-340, in the Supreme Court of the United States.