Supreme Court Hears Argument On Applicability Of Federal Arbitration Act To Transportation Independent Contractor Agreements

Michael T Maroney is a Partner in our Boston office.

Linda Auerbach Allderdice is a Partner in our Los Angeles office

Jameson B Rice is an Associate in our Tampa office.

On Oct. 3, 2018, the U.S. Supreme Court heard oral argument in the case of New Prime Inc. v. Oliveira, No. 17-340. This case addresses (1) whether an arbitrator or the court should resolve a dispute over the applicability of the Federal Arbitration Act's Section 1 exemption for "contracts of employment" of transportation workers, and (2) whether the Section 1 exemption is applicable to independent contractor agreements. As we noted in a prior blog post, this case has key implications for deciding the arbitrability of independent contractor misclassification cases.

In its brief to the Court, Petitioner New Prime, Inc. argued that the applicability of the Section 1 exemption must be resolved by an arbitrator where, as here, the parties agreed to arbitrate threshold arbitrability issues. Respondent Dominic Oliveira maintained that courts must determine whether the FAA applies before relying on it to compel arbitration. On the second issue, both sides agreed that the term "contracts of employment" must be given its ordinary meaning at the time Congress enacted the FAA, but they disagreed about the ordinary meaning of that term. New Prime asserted the term means contracts that purport to establish a common-law employer-employee relationship. Oliveira argued the term refers to any agreements to perform work—including independent contractor agreements.

During oral argument, New Prime's counsel, Theodore Boutrous, stated that whether an arbitrator or a court decides if the agreement is a "contract of employment," that decision should be based on the four corners of the contract. Oliveira's counsel, Jennifer Bennett, responded that the issue cannot be decided solely on the basis of what the agreement states, but rather on the worker's actual status. Mr. Boutrous reiterated that Congress intended traditional employment agreementsnot independent contractor agreementsto be the subject of the exemption, while Ms. Bennett pointed to sources suggesting that "contract of employment" covered a general category of agreements to perform work. Both sides agreed, however, that a threshold determination by a court or an arbitrator that a driver's...