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NJ Ruling Opens State Battles On Transpo Worker Exemption

Law360 - Linda Chiem

New Jersey transportation companies gained some new leverage in fighting employment class actions after the state Supreme Court reinforced employers' arbitration agreements under Garden State law, even if their workers are exempt from arbitration under a federal law.

The state's highest court ruled Tuesday that the New Jersey Arbitration Act automatically applies to arbitration agreements, even if workers subject to those agreements qualify for the Federal Arbitration Act's so-called transportation worker exemption that would otherwise let them pursue their disputes in court.

In the year-and-a-half since the U.S. Supreme Court's January 2019 decision in New Prime v. Oliveira, transportation workers picked up some momentum in chipping away at the shield of arbitration clauses and class action waivers that many employers have long relied on to insulate themselves from legal attacks. New Prime clarified that the FAA's Section 1 exemption applies to transportation workers regardless of whether they're employees or independent contractors.

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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." Neither the statute nor New Prime defined the phrase "engaged in foreign or interstate commerce," or identified which "class[es] of workers" count toward the exemption.

As a result, those issues have been heavily litigated in cases involving traditional motor carriers as well as gig-economy companies like Uber and Lyft, yielding mixed results while also circling around the question of whether an arbitration agreement is enforceable as a matter of either a state arbitration act or state contract common law if the FAA doesn't apply.

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Plaintiffs' attorneys rejected the suggestion that the New Jersey ruling has sweeping implications across the country.

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Christopher McNerney of Outten & Golden LLP, which represents workers in employment-related litigation, agreed, saying the New Jersey Supreme Court did not rule on the FAA and limited its holding specifically to New Jersey law.

"Thus, going forward, the opinion should only impact New Jersey cases where the FAA is first found not to apply," he said.

New Jersey's decision isn't binding on courts in other states, but employers elsewhere will make a point of using it to bolster their respective cases. 

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