In an 8-0 decision, the U.S. Supreme Court ruled that legal disputes between carriers and independent contractors cannot be forced into arbitration even if the contractor agreements includes an arbitration clause. Specifically, independent owner-operator truck drivers are exempt from the 1926 Federal Arbitration Act.
The dispute arose when owner-operator Dominic Oliveira (“Oliveira”) sought to have a lawsuit brought against carrier, New Prime Inc. (“New Prime”), over his employment status heard in court. Specifically, Oliveira contends that he was misclassified as an independent contractor, as opposed to an employee. New Prime argued that the dispute was bound to arbitration based on an arbitration clause contained in the contract between Oliveira and the carrier.
The Supreme Court heard oral arguments from the parties in October 2018. It was expected that the justices would be split based on their proclivities towards treatment of businesses, in general. However, the decision rendered on January 15, 2019 was unanimous in favor of Oliveira.
As a general rule, arbitration agreements are binding pursuant to the 1926 Federal Arbitration Act unless an exception exists. One such exception pertains to transportation workers. Specifically, the law states that “transportation workers” who have “contracts of employment” are exempt from clauses that force litigation into arbitration.
Oliveira argued that this exception applies to his case (and other owner-operator truck drivers), and the Supreme Court agreed. The opinion was written by Justice Neil Gorsuch, who wrote that “[t]he parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean that [the 1926 Federal Arbitration Act] authorizes a court to stay litigation and send the parties to an arbitral forum.”
Critically, the Supreme Court did not rule on the underlying issue of whether Oliveria was an independent contractor or an employee of New Prime. Notwithstanding, this decision is a huge win for transportation workers seeking to avoid arbitration, in favor of traditional judicial examination. This decision will likely result in increased litigation costs and longer fights over disputes arising between transportation workers and carriers.