US Supreme Court Limits Arbitration

Today the United States Supreme Court limited the use of arbitration for companies engaged in interstate transportation. The court reaffirmed that the Federal Arbitration Act (“Act”) and the federal courts’ authority to compel arbitration do not apply to employment agreements entered into by employees of companies engaged in interstate transportation. And, the court went further to rule that arbitration could not be compelled for independent contractors engaged in interstate transportation.

The case involved an interstate trucking company and one of its drivers who worked under an operating agreement defining him as an independent contractor. The operating agreement contained a mandatory arbitration provision. The driver contended that the court could not enforce the arbitration provision because disputes involving “contracts of employment” of certain transportation workers are exempted from the Act. The company made two arguments to explain why arbitration could be permitted. First, that the parties’ agreement gave the arbitrator, not the court, the authority to determine if the agreement was covered under the Act. Second, assuming the court had the authority to rule, “contracts of employment” under the Act referred only to contracts that establish an employer-employee relationship and not to contracts with independent contractors. The court disagreed with both arguments.

Interstate transportation companies should review their independent contractor/owner-operator agreements and be prepared to resolve disputes outside of the Act.

New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019)