In the recent case of NEW PRIME INC. v. OLIVEIRA, the United States Supreme Court carved out an important exception to the rule that arbitration agreements are typically enforceable to prevent employees from bringing actions in court, when it ruled unanimously that workers engaged in interstate commerce can avoid arbitration agreements and have their grievances addressed in courts of law.
In that case, New Prime Inc. was an interstate trucking company, and Dominic Oliveira worked for New Prime as a driver involved in interstate travel. He and other similarly situated drivers signed an agreement with New Prime that 1) identified the drivers as independent contractors, and 2) subjected them to arbitration should a dispute arise. When a dispute did arise, Mr. Oliveira filed a class action lawsuit for wage and hour labor violations. Based on the agreement, New Prime asked the court to compel arbitration. Relying on a statutory exception to arbitrability of disputes involving workers engaged in interstate commerce (section 1 of the Federal Arbitration Act [FAA]), Mr. Oliveira argued that the arbitration agreement did not apply to him and the drivers. The US Supreme Court agreed.
The Court evaluated the FAA, and upheld the plain language of the exception contained in section 1 pertaining to workers in interstate commerce, by ruling that the statute clearly exempted interstate workers from having to arbitrate their grievances, and that this exception to arbitrate applies to all interstate workers, including independent contractors, and not just employees in employer-employee relationships. The Court did not specifically discuss what constitutes whether a worker is involved in interstate commerce or not, as this was relatively a non-issue for the interstate drivers in this case.
The take away from this decision is that the courts will recognize and enforce the plain language of the FAA, both in terms of when it will apply, and when it will not apply due to the exceptions stated in the statute.
Employers need to understand and recognize the limits of their arbitration agreements and class action waivers based on specific statutory exceptions. If you have arbitration agreements with workers, whether they are employees or independent contractors, who are involved in interstate work, this U.S. Supreme Court decision will likely mean that you won’t be able to compel that worker to arbitrate his or her grievance, and that you will likely be forced to litigate the dispute in a court of law. If you have any questions about how your arbitration agreement may be affected by this ruling, please feel free to contact one of our lawyers.
The experienced employment law attorneys at Roxborough, Pomerance, Nye & Adreani, LLP are available to answer your questions about these laws and their potential effect on your business, and we will continue to be at the forefront of advocating for the best interests of California employers.
