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U.S. Supreme Court Decides Transportation Independent Contractors Exempt from forced arbitration under Federal Arbitration Act

Jan
18,
2019
0

A huge win in the US Supreme Court for Professional truckers, specifically Independent Contractors, who will no longer be forced into arbitration under the Federal Arbitration Act.  Independent Contractors exempt from Federal Arbitration Act
The case is New Prime Inc. v. Dominic Oliveira, case number 17-340, in the U.S. Supreme Court

NEW PRIME INC. v. OLIVEIRA United States Supreme Court decides ALL transportation workers are exempt from forced arbitration in Federal Arbitration Act ( FAA)

It has been accepted among the trucking industry that independent contractors should be forced into arbitration rather than proceed through the courts when discrepancies occur between parties. Carriers have based this on the 1925 Federal Arbitration Act ( FAA).

The  trucking industry has exerted that an independent contractor is NOT an employee and thus should not be exempt from FAA and should be forced into arbitration.

The U.S. Supreme Court ruled January 15th that trucking company New Prime Inc. cannot compel arbitration in a class action which alleged it failed to pay independent contractor truck-driver apprentices the proper minimum wage. This recent decision of FAA exemptions by SCOTUS has now set precedent for Independent Contractors and they too will be included in FAA arbitration exemption.

The US Supreme Court said Congress meant to exempt ALL transportation workers from the Federal Arbitration Act.  In other words, the exemption does not mean just employees, and includes independent contractors. Thus independent contractors now have the right to go though the courts and not forced into arbitration, no matter how they are classified or what the arbitration wording is in their contracts.

The Federal Arbitration Act exemption when read, appears to be clear as day and says the FAA  excludes transportation workers from being forced into arbitration.
So how then have so many leased on trucking Independent Contractors been forced into arbitration?
Simply put, there has been a discrepancy in the interpretation of what the FAA actually infers.

Here is what the exemption says
Section 1 of the FAA states that the Act does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 

Looks pretty clear to me, and it did to U.S. Supreme Court Justice Neil Gorsuch also.

How it all started: DOMINIC OLIVEIRA v. NEW PRIME INC

In March 2015, Dominic filed a lawsuit against Prime on behalf of himself and thousands of current and former Prime drivers who have been misclassified as independent contractors, therefore were not offered the protections of the Fair Labor Standards Act (FLSA) 29 U.S.C. §§ 201-219, as well as the Missouri minimum-wage statute, by failing to pay its truck drivers minimum wage..

Oliveira v. New Prime, Inc.
United States Court of Appeals, First Circuit.
DOMINIC OLIVEIRA, on his behalf and on behalf of all others similarly situated, Plaintiff, Appellee, v. NEW PRIME, INC., Defendant, Appellant.
No. 15-2364    Decided: May 12, 2017

Oliveira and his legal team, argued he was misclassified as an independent contractor.
US Department of Labor- Employee Misclassified as Independent

New Prime then filed a motion to compel arbitration under Section 4 of the Federal Arbitration Act (“FAA”). In response, Oliveira argued that New Prime cannot compel arbitration because Section 1 of the FAA excludes “contracts of employment of . . . seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” commonly known as the transportation workers exclusion.

The Oliveira legal team won their case against New Prime in the U.S. 1st Circuit Court of Appeals, claiming that he  is exempt from his arbitration clause and that his initial misclassification lawsuit should be taken up by the courts. New Prime argued otherwise, saying his contract stipulates that his original lawsuit against the company, is bound to arbitration. Prime then appealed to the U.S. Supreme Court

In October 2018, Public Justice’s Jennifer Bennett argued on Oliveira’s behalf before the U.S. Supreme Court. You can listen to her oral argument and read transcripts here.

Jennifer Bennett

Jennifer Bennett of Public Justice representing Dominic Oliveira case in Supreme Court Hearing

Public Justice Secures Historic Workers’ Rights Victory at Supreme Court

In January 2019, the Supreme Court unanimously ruled for Dominic Oliveira, applying the law as it was written: as exempting all transportation workers. It is a landmark win for workers’ rights and a blow against workplace forced arbitration.

Jennifer Bennett

Public Justice Secures Historic Workers’ Rights Victory at Supreme Court

Jennifer Bennett, said Oliveira’s original lawsuit regarding his classification as a contractor can now proceed in court.

 “Today’s ruling is a huge step forward for truck drivers. This decision will enable so many drivers like Dominic who are not being paid what the law requires to go to court and fight for their rights,” Jennifer Bennett- Public Justice

REVIEW: Prime attempted to force this lawsuit out of court and into arbitration. Like many trucking companies nowadays, the contract Prime requires that many of its drivers sign to work for the company contains an arbitration clause, which states that drivers may not sue the company in court. The company argued that the Federal Arbitration Act requires courts to enforce this arbitration clause and kick Dominic (and the other drivers whose wages he’s fighting for) out of court. But, by its terms, the Federal Arbitration Act does not apply to the “contracts of employment” of transportation workers. And truck drivers, of course, are transportation workers. The company argues that it can get around this exception because it labels its drivers “independent contractors.” But the history of the Act—and the ordinary meaning of its terms at the time it was passed—makes clear that it exempts all transportation workers, regardless of how their company labels them.

In May 2017, the First Circuit Court of Appeals, the first appellate court to consider the issue, agreed. Prime then appealed to the U.S. Supreme Court and lost in the unanimous decision.

Listen to the replay as Dominic  goes through the timeline explaining his experience, from driver trainee, to leased independent contractor, back to company driver, and finally to the court

Employee/Independent Contractor- Misclassification & the Federal Arbitration Act

Dominic Oliveira

In March 2015, Dominic Oliveira filed a lawsuit against Prime on behalf of himself and thousands of current and former Prime drivers who have been misclassified as independent contractors, therefore were not offered the protections of the Fair Labor Standards Act, including minimum wage.

During the show, Trucker Dominic Oliveira explains how he brought a class action against Prime in March of 2015, alleging that it violated the FLSA and the state’s minimum wage statute. New Prime made their case against Dominic stating that he should be forced into arbitration and not with the courts. Although Dominic won his case in May 2017 with the First Circuit Court of Appeals, (the first appellate court to consider the issue),  Prime then appealed to the U.S. Supreme Court. Dominic’s attorney Jennifer Bennett, an Attorney at Public Justice,.  represented Dominic as she made her oral argument to the Supreme Court.   Listen to Dominic and attorney Jennifer Bennett

U.S. Supreme Court makes their Decision

The US Supreme Court justices decision affirmed the First Circuit ruling that has now allowed for truck driver Dominic Oliveira’s Fair Labor Standards Act suit against New Prime to proceed in court rather than forced arbitration, after determining that an exemption in the Federal Arbitration Act for interstate transportation workers applies to all such workers whether they’re classified as employees or independent contractors.

According to Section 1 of the FAA exempts from arbitration “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,


Justice Neil Gorsuch wrote for the court “When Congress enacted the Arbitration Act in 1925, the term ‘contracts of employment’ referred to agreements to perform work,”. “No less than those who came before him, Mr. Oliveira is entitled to the benefit of that same understanding today. Accordingly, his agreement with New Prime falls within [Section] 1’s exception, the court of appeals was correct that it lacked authority under the act to order arbitration, and the judgment is affirmed.”

“The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the act authorizes a court to stay litigation and send the parties to an arbitral forum,” Gorsuch wrote in his 20-page opinion.

The Supreme Court opinion was unanimous, except for Justice Brett Kavanaugh, who was recused from the case as he had not yet been confirmed during the hearing. Justice Ruth Bader Ginsburg filed a separate concurring opinion.

The ruling, according to Gorsuch, means courts will be able to determine whether the “contracts of employment” exclusion applies before arbitration begins.

Prior to the commencement of the Oliveira lawsuit, many courts had interpreted Section 1’s exemption to apply only to employees, not to independent contractors (whose arbitration agreements were enforced).  This has now changed.

 Trucking Industry Background on forced arbitration through FAA

It has been acceptable knowledge that carriers have been taking advantage of professional drivers by convincing them to be independent contractors, a term intertwined with owner operator.  Note, a true sense of the meaning of Independent usually refers to one who has his/her own authority.
A common practice is for the driver, many times a new inexperienced driver, is to become a leased on owner operator to the carrier. They run under the carrier authority.
These drivers end up signing a contract with the carrier which includes an arbitration clause, which basically states that under the 1925 Federal Arbitration Act, these drivers are bound to arbitration rather than pursuing the court system during disputes of unfair carrier wrongful behavior and discrepancies.

The hook to convince drivers into working as an “independent” is that they will earn more money, have more freedom, own their own truck, and be their own boss.  What they don’t emphasize is that they will be pay for all expenses for the truck, their truck payment, lose all employee rights and benefits, including protections under the Fair Labor Standards Act (FLSA), and yet these “independents” still remain under the control of the carrier.  They are commonly considered glorified employees without rights or benefits.

A most detrimental aspect has been the misclassification of these drivers as “independent contractors”.  By labeling drivers “independents”, carriers have secured the drivers inability to go through the courts when disputes arise, and drivers have been in the past forced to go through 3rd party arbitration to resolve their differences.  Many times  arbitration has gone in favor of the carrier.

Federal Arbitration Act  Title 9, US Code, Section 1 14, was first enacted February 12, 1925
FAA Summary

Arbitration is a method of legal dispute resolution in which a neutral, private third party, rather than a judge or jury, renders a decision on a particular matter.

Under a growing number of consumer and employment agreements, companies have come to require arbitration to resolve disputes.

While arbitration is often viewed as  an expeditious and economical alternative to  litigation, consumer advocates and others contend that mandatory arbitration agreements create one-sided arrangements that deny consumers and employees advantages afforded by a judicial proceeding.

The Federal Arbitration Act (FAA) was enacted in 1925 to ensure the validity and enforcement of arbitration agreements in any “maritime transaction or… contract evidencing a transaction involving commerce[.]”

The U.S. Supreme Court (Court) has recognized the FAA as evidencing “a national policy favoring arbitration.”

The application of the FAA, however, particularly in light of various state law requirements and the use of different types of arbitration agreements, has raised numerous legal questions and been the subject of several cases before the Court.

Trucker Dominic Oliveira and attorney Jennifer Bennett will be back on AskTheTrucker Live on Thursday 1-24-19 at 6PM to review the case and discuss next steps now that the Supreme court has declared ALL transportation workers are exempt from the Federal Arbitration Act.

Join us on AskTheTrucker ‘Live’ 1-24-19 6PM for Part 2
Big Supreme Court win for Independent Truckers-Ends Carrier forced Arbitration

A special message from Allen Smith- Carrier Truck Leasing-   Ive written many articles, created truck lease surveys, and had radio show discussing the dangers of taking on a carrier lease purchase agreement.  These agreements are designed to fail and to make the trucking company profit, plain and simple. For over 10 years we have recommended only one Company to purchase or Lease a Truck from, Lone Mountain Truck.  They are honest. professional, and reliable, period.  As a truck driver advocate fighting for truckers, I would not say it if it wasn’t true.

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By: Allen Smith

Allen Smith is a 37 year veteran who started at an early age in a household goods family moving business. He began driving straight trucks in 1977 and moved to the big rigs in 1982. His experience within the industry includes; owner operator, company driver, operations manager, and owner of a long distance HHG moving business, taking many of the long haul moves himself when needed. Allen Smith, a truck driver advocate who is driven by the desire to help others succeed within an industry where injustice, unrewarded sacrifice, and lack of respect and recognition exists. Allen and his wife Donna are hosts of Truth About Trucking ”Live” on Blog Talk Radio. Other websites include AskTheTrucker, TruckingSocialMedia, NorthAmericanTruckingALerts, TruthAboutTrucking, and many Social Media websites. In 2011 Allen and Donna hosted the first Truck Driver Social Media Convention, designed to create unity and solutions for the trucking industry. This is now being extended through the North American Trucking Alerts network as those within the industry join forces for the betterment of the industry. Allen strongly supports other industry advocates who are also stepping up to the plate to help those who share honesty, guidance and direction. He believes that all those involved in trucking need to be accountable for their part within the industry, including drivers, carriers, brokers, shippers, receivers, etc… The list of supporters and likeminded people grow daily, networking together and sharing thoughts and ideas for the betterment of trucking. He has coined the popular phrase "Raising the standards of the trucking industry"

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