The recent U.S. Supreme Court decision in New Prime v. Oliveira provides a cautionary tale for interstate business owners, particularly in the trucking industry. In New Prime, the Supreme Court determined that trucking companies cannot block truck drivers from seeking redress in court for the companies’ alleged illegal activity solely by classifying drivers as “independent contractors.”
In this case, Oliveira, an independent-contractor truck driver, sued New Prime Trucking for allegedly failing to pay him adequate wages. New Prime attempted to compel arbitration under the Federal Arbitration Act (FAA), which would have prevented Oliveira from bringing his claims in court. However, Section 1 of the FAA carves out an exception to compelling arbitration, for disputes arising out of the “contracts of employment” of certain interstate transportation workers. New Prime argued that because Oliveira was technically an independent contractor, he was not an employee and therefore, the exception could not apply to Oliveira or any independent contractor.
The Supreme Court ruled in the alternative however, holding that although Oliveira was not an employee, Oliveira’s agreement to drive was a “contract of employment” under Section 1 of the FAA. The Court determined that as a general matter, all contracts involving transportation workers that are independent contractors are considered to have engaged in “contracts of employment” pursuant to Section 1. Therefore, despite an existing arbitration agreement in a contract, transportation workers have the opportunity to bring claims to court instead of through arbitration.
The Supreme Court’s holding in New Prime may result in an uptick of transportation-related litigation, despite pre-existing arbitration agreements. This is true, even for drivers that are technically classified as independent contractors. Under New Prime and Section 1 of the FAA, it appears that trucking companies may no longer be able to resort to arbitration for any employee, or independent contractor-related claims. Trucking companies should review existing agreements pertaining to both employees and independent contractors and be aware of the potential for increased litigation. For consultation on this complex matter or for assistance in independent contractor litigation claims, contact the attorneys at Rock Fusco and Connelly, LLC.