On January 15, 2019, the United States Supreme Court issued a landmark decision, ruling unanimously that independent contractors who work in transportation may not be forced into mandatory arbitration. In New Prime Inc. v. Oliveira, the Court held 8-0 that an exemption in the Federal Arbitration Act (FAA) for transportation workers involved in interstate commerce applies to independent contractors. This is a significant change in the law. For many years, the Court consistently favored the enforceability of arbitration agreements, but yesterday that approach shifted.
The Court found, first, that the determination as to whether exceptions of the FAA applied was a role for the courts and not an arbitrator, and second, that the intent of the FAA covered any type of employer-employee agreement, including independent contractor relationships. In reaching this decision, the Court explained that, in 1925, when the FAA was adopted by Congress, the word “employment” did not distinguish between employers and contractors, and thus the intent of the FAA was to cover any agreements to perform work.
In light of New Prime, workers in the trucking and transportation industries cannot be forced to arbitrate even if a contract is “crystal clear and requires arbitration of every question under the sun.” The Court found that regardless of the terms of a written agreement between the parties, the FAA does not authorize a trial court to stay litigation and send the parties to arbitration.
The past year was a wild ride for the transportation industry, and it looks like 2019 will be no different. We are continuing to analyze this new decision and monitor its fallout. For now, we continue to advise that class action waivers should be used to limit risks of class-wide claims, whether in arbitration or in court.