Transportation Workers Can Avoid Arbitration

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The Supreme Court holds that, under federal law, truckers cannot be compelled to arbitrate.

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A truck driver working long hours yet still earning less than the minimum wage tries to bring a class action lawsuit against a trucking company. But the company tells him he signed an arbitration agreement that prevents him from filing a lawsuit against the company—and that, in any event, each driver must file a separate claim instead of a class action. Who should win the argument?

In a recent decision written by Justice Neil Gorsuch, the U.S. Supreme Court unanimously held that, under the Federal Arbitration Act, employers cannot force transportation workers into arbitration of disputes, regardless of their status as independent contractors or employees.

This decision represents a brief respite for workers who have lost case after case in recent years dealing with mandatory arbitration. Just last term, the Supreme Court held that mandatory arbitration agreements that prevent workers from bringing claims collectively do not violate the National Labor Relations Act.

For many workers, arbitration agreements present a serious hurdle to seeking legal justice. These agreements usually prohibit the filing of class actions with their fellow workers, meaning that overall awards will be smaller and lawyers ready to file lawsuits will be harder to find. As a result, arbitration agreements are generally thought to favor employers. Proponents of arbitration, however, argue that the process allows faster and more informal ways of resolving disputes, saving everyone involved time and money.

Dominic Oliveira, the truck driver who brought this case to the Supreme Court, did not want to go through arbitration. He alleged that he made well below the minimum wage working for New Prime Inc., a trucking company. He started as an apprentice and drove for 10,000 miles effectively without pay. He then became a trainee, which meant he earned about $4 per hour while he was driving. After training, the company pressured him into signing on as an independent contractor, rather than as an employee, and deducted fees from his paycheck so he still earned below minimum wage.

Fed up, Oliveira tried to bring a legal action with other drivers under the theory that the company misclassified them as independent contractors and therefore owed them back wages. New Prime, however, pointed to the arbitration agreement that Oliveira signed and claimed he could not bring his case anywhere but in arbitration. Oliveira then argued that the Supreme Court had previously held that the Federal Arbitration Act, passed in 1925, excluded transportation workers from the general requirement that courts must enforce arbitration agreements.

Based on these arguments, the Court had to interpret the provision in the federal arbitration law stating it does not “apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Oliveira’s lawsuit raised two questions. First, can an arbitration agreement give arbitrators the power to decide whether the contract is arbitrable in the first place, rather than the courts? Second, does the phrase “contracts of employment” in the federal arbitration law apply to transportation workers who are independent contractors as well as employees?

For the first question, the Court held that the mechanics of the Federal Arbitration Act require courts to retain the power to decide whether a contract was arbitrable. The law states that courts must compel arbitration in contracts that fall within the parameters of the act, but Justice Gorsuch wrote that courts are obligated first to make the decision about whether the act applies to the contract and they cannot delegate that decision to arbitrators.

For the second question, Justice Gorsuch looked to the original meaning of the words “contracts of employment” and found that in 1925 the phrase did not imply the current distinction between employees and independent contractors. Instead, the Court found that the phrase “contracts of employment” was synonymous with an “agreement to perform work,” so it did in fact cover independent contractors and employees. For independent contractors, who usually go unprotected in federal laws regulating work, this decision presented a rare opportunity for equal treatment with employees.

The Court reached a unanimous decision, although Justice Kavanaugh did not take part in the opinion. Justice Ginsburg joined with her colleagues but wrote a concurring opinion to point out that, although she agreed with the result of the case, she thinks Congress “may design legislation to govern changing times and circumstances” and that the original meaning of a phrase might not always be the most appropriate way to interpret a statute.

After the Court’s decision, Oliveira and all other transportation workers will now be able to pursue their employment disputes in court rather than via arbitration. Although many workers in the United States still work under mandatory arbitration agreements, those in the transportation sector will once again be able to bring cases directly to court.