On Tuesday, January 15, 2019, the U.S. Supreme Court found that truck drivers classified as independent contractors cannot be compelled to arbitrate their claims under the Federal Arbitration Act (FAA). See New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019).

This decision has significant ramifications for transportation industry companies that previously utilized arbitration agreements with their independent contractor drivers. Given the court’s ruling, those independent contractor drivers can no longer be compelled to arbitrate their claims under the FAA.

The plaintiff, Dominic Oliveira, worked as an independent contractor driver for a trucking company, New Prime Inc. As part of his contract with New Prime, Olivera agreed to arbitrate all disputes. In contradiction to this agreement, Oliveira brought a claim in court against New Prime on behalf of himself and thousands of other independent contractor drivers. Oliveira alleged that he and the other drivers were misclassified as independent contractors, and that they were actually employees of the company.

New Prime asked the court to use its authority under the FAA to compel the case to arbitration, pursuant to the parties’ arbitration agreement. Oliveira opposed, arguing that the court did not have such authority because section 1 of the FAA excludes disputes involving “contracts of employment” of transportation workers, including drivers. New Prime maintained that the agreement was enforceable because the section 1 exclusion only applies to employees and not independent contractors.

The court found that the section 1 exclusion applies both to employee and independent contractor drivers. The court reasoned that “contracts of employment” is broadly defined and includes work performed by independent contractors even where no employment relationship exists. In reaching this conclusion, the court engaged in an in-depth analysis of what the term “contracts of employment” meant when the FAA was drafted. The court found that when Congress passed the FAA in 1925, dictionaries tended to treat the term “employment” interchangeably with “work.” The court, therefore, held that the phrase “contracts of employment” in section 1 includes independent contractor agreements to perform work.

The transportation industry is likely to see an uptick in class action litigation arising from this decision. This case, however, is not the death knell for arbitration agreements in the transportation industry. Rather, transportation industry companies may still seek to enforce similar arbitration agreements under state law or common law. Litigation will continue regarding whether such an arbitration agreement is enforceable under those laws. Companies should seek legal counsel to understand how this case may impact their current workforce and operations.