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Breaking: United States Supreme Court Holds Independent Contractors in Transportation Industry May NOT Be Forced Into Mandatory Arbitration


Back in October, the United States Supreme Court heard oral arguments in New Prime, Inc. v. Oliveira.  The case, which came up on appeal from the First Circuit Court of Appeals, raised two primary questions for the Court to consider:  1) Whether a court should determine whether the Federal Arbitration Act's Section 1 exclusion for disputes involving "contracts of employment" of certain transportation workers applies before sending a case to arbitration (or if the matter should instead go straight to an arbitrator to decide the question of arbitrability), and 2) Whether the transportation worker, Dominic Oliveira ("Oliveira"), had a "contract of employment" that fell within Section 1's exception.

At October's oral arguments, I made note of the Justices giving counsel for New Prime, Inc. ("New Prime") a rather rough go of it, based upon the tenor of their questions.  On the other hand, the questions aimed at counsel for Oliveira seemed to suggest that the Court found his arguments more compelling.  I looked into my crystal ball and thought that a 6 - 3 or 7 - 2 ruling in favor of Oliveira was likely, based upon how oral arguments played out.  

Well, it turns out I was close.  On Tuesday, Justice Neil Gorsuch delivered the opinion of the Court:  An 8 - 0 ruling affirming judgment from the lower court in favor of Oliveira.  (Justice Brett Kavanaugh did not take part in the opinion.)  In the majority opinion, Justice Gorsuch wrote that courts, not arbitrators, should decide whether an agreement falls under the FAA exception as courts are better positioned to determine whether the FAA covers the agreement in question before compelling arbitration. As for Oliveira and his independent contractor status, Justice Gorsuch addressed whether his work agreement with New Prime counted as a "contract of employment".  To answer the question, Justice Gorsuch noted it was imperative to look at when when the FAA was originally adopted, in 1925, to determine what "contract of employment" meant then.  As the opinion points out, "contract of employment" was generally understood to have a broad meaning, based in part upon caselaw and statutory text from that time.  Consequently, the Court found it was reasonable to hold that "contract of employment" would include independent contractors as well as employees.

Readers might be surprised to see the Supreme Court rule in such a large number against the enforceability of an arbitration agreement here.  We have previously seen the Supreme Court tend to be quite liberal if you will, in regard to the enforcement of arbitration agreements in the workplace.  Nevertheless, the Court's holding here that contracts of employees and independent contractors with interstate transportation companies are excluded from the FAA's mandatory arbitration provision is noteworthy.  This is a major victory for employees and a dissapointing outcome for employers.


For a copy of the Supreme Court's Opinion:  https://www.supremecourt.gov/opinions/18pdf/17-340_o7kq.pdf

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