In a unanimous January decision, the U.S. Supreme Court held that railroad workers, truckers and others working in the transportation industry as “independent contractors” rather than employees could avoid forced arbitration and pursue wage and hour and other claims in federal court. The ruling in New Prime Inc. v. Oliveira was a rare victory at the high court for workers seeking to enforce their rights in civil litigation rather than arbitration, which is often more favorable to employers.
Many companies include mandatory arbitration provisions in their employment contracts or require independent contractors to agree to arbitrate disputes, thus precluding them from filing federal lawsuits for wage and hour or other labor law violations. Companies sued in such cases will move to dismiss the suits and compel arbitration under the Federal Arbitration Act (FAA).
However, the FAA contains certain exclusions that prevent employers from using it to compel arbitration. One such exclusion applies to “contracts of employment of… seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” commonly known as the transportation worker exclusion.
The plaintiff in Oliveira worked as a driver for New Prime under an “Independent Contractor Operating Agreement” which included an arbitration clause. Oliveira filed a putative class action in federal court alleging that New Prime failed to pay truck drivers minimum wage under the Fair Labor Standards Act and state labor laws.
After the district court held that the transportation worker exclusion did not apply to independent contractors, the appellate court reversed and concluded that it did, a conclusion ultimately affirmed by the Supreme Court.
While this case does allow independent contractors working in the railroad and trucking industries to avail themselves of the transportation worker exclusion and pursue their claims in federal court, it does not affect independent contractors who work in all other industries not covered by a specific FAA exclusion. These workers will likely still be bound by any arbitration agreement they signed and will be forced to raise their claims in that forum.