One to Keep An Eye On: New Prime, Inc. v. Oliveira (United States Supreme Court)

As with many employment and labor law related cases (and bills) being litigated around the country, there are always a few that stand out.  This is one to keep an eye on.

New Prime, Inc. v. Oliveira - United States Supreme Court

Facts:  New Prime, Inc. ("New Prime") is engaged in interstate trucking that has both company drivers and independent contractors operate its vehicles.  Dominic Oliveira ("Oliveira") is a former New Prime driver that was an independent contractor.  In two separate agreements, New Prime and Oliveira agreed that the working relationship was that of an independent contractor and any disputes would be resolved via arbitration.  Oliveira filed a putative class action against New Prime and New Prime moved to compel arbitration.  

For those needing a refresher, the district court based its analysis upon the Federal Arbitration Act ("FAA").  The FAA, singed into law by President Calvin Coolidge in 1925, provides for the judicial facilitation of private dispute resolution through arbitration.  (How is that for a bit of legalese?)  In short, the FAA provides a framework for which compulsory and binding arbitration is to be conducted.  However, Section 1 of the FAA provides that a narrow exemption exists, for those working in the transportation industry:

• [N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.  (Emphasis added)

As a result, these workers are exempt from the FAA (and therefore are not subject to binding arbitration).  The district court denied New Prime's motion, however, the court did acknowledge that Section 1 refers to employer-employee agreements only, but not for independent contractors.  Regardless, the court noted that because it was not clear whether Oliveira and New Prime had an employer-employee or independent contractor relationship, further discovery was needed to determine if the Section 1 exemption applied.  New Prime appealed.

The First Circuit Court of Appeals, interpreting the FAA and Section 1, found that it applies to both employees and independent contractors.  In doing so, the Court gave the term "contracts of employment" a broad reading, in conflict with holdings from the Eighth and Ninth Circuits and the California Court of Appeal.  New Prime petitioned for a rehearing which was denied.  New Prime subsequently filed a writ of certiorari with the Supreme Court. 

Issue:  Should the Federal Arbitration Act's Section 1 exemption for transportation workers' "contracts of of employment" be interpreted based upon the universal meaning of "contract of employment" and include both independent contractors and employees or should it be construed more narrowly to only exempt employees? 

Current Status:  Earlier this month, the Supreme Court heard oral arguments in the case.  In essence, counsel for New Prime argued that the "contracts of employment" are limited to contracts with employees, rather than independent contractors, such that the "contracts of employment" exemption of the FAA does not apply to independent contractors.  As some have noted, this argument ran into somewhat of a buzz saw by several of the Justices, including Justice Sonya Sotomayor, who pointed out that if "contract of employment" was meant to include only employees, Congress could have drafted the statute to say "any other class of employees" rather than just "any other class of workers".  Justice Neil Gorsuch jumped in and noted that when interpreting the FAA, "I'd think you'd agree that we have to interpret it as a reasonable reader would have at the time [that Congress drafted it]."  Justice Gorsuch also pointed out that New Prime's own website identified the company as "employing" independent contractors.

On the other hand, counsel for Oliveira used her time to reinforce the argument that courts should give statutory terms their ordinary meaning.  Thus, following this argument, "contracts of employment" would include both employees and independent contractors.  For the most part, the Justices did not raise much in the way of a roadblock for Oliveira's counsel, in comparison to counsel for New Prime.

Looking Ahead:  Based upon the tenor of questions (or lack thereof) for much of oral arguments, not to mention that Justice Gorsuch and Chief Justice John Roberts appeared to take a hard line approach to New Prime's argument, it is expected that the Supreme Court will rule in favor of Oliveira.  Readers might find this expected ruling against the employer to be unusual, given that the Court has taken to giving the FAA a broad reading and has as recently as this past May made a ruling in favor of employers finding workplace arbitration agreements that bar class actions are lawful.  However, a 6 - 3 or 7 - 2 ruling in Oliveira's favor, on this particular portion of the appeal, would not be much of a surprise.

For additional information:  https://www.supremecourt.gov/docket/docketfiles/html/public/17-340.html