The union says truck drivers will be prevented from waiving their rights through private arbitration agreements; the decision may spark class action lawsuits against owner-operator fleets.
The Teamsters union is hailing a decision handed down by the U.S. Supreme Court on Tuesday that it says will prevent truck drivers from waiving their rights through private arbitration agreements.
The decision in New Prime Inc. v. Dominic Oliveira “is a great victory for all workers in the transportation industry, including employees, legitimate independent contractors and drivers misclassified as independent contractors who are suffering egregious wage theft,” said Fred Potter, vice president at large of the Teamsters and director of the union’s port division. “Although we have consistently challenged employers’ attempts to compel private arbitration to avoid a public legal battle, the U.S. Supreme Court ruling makes it clear that employers cannot and should not require drivers to waive their right to their day in court through binding arbitration agreements.”
New Prime is an interstate trucking company and Oliveira was a driver.
“In a class action lawsuit in federal court, Mr. Oliveira argued that New Prime denies its drivers lawful wages,” the court said.
While the operating agreement between New Prime and Oliveira called him an independent contractor, the court said, “In reality, New Prime treats them as employees and fails to pay the statutorily due minimum wage.”
New Prime asked the court to use its statutory authority under the Federal Arbitration Act to compel arbitration according to the terms found in the operating agreements.
Oliveira’s attorneys pointed to Section 1 of the Arbitration Act, saying it carves out an exception for “contracts of employment of … workers engaged in foreign or interstate commerce” and arguing it did not matter whether one viewed him as an employee or independent contractor and that the Federal Arbitration Act did not supply the courts with authority to compel arbitration.
New Prime had argued that any question regarding the applicability of Section 1 belonged to the arbitrator alone to resolve or, alternatively, if the court could address the issue, the term “contracts of employment” referred only to contracts that establish an employer-employee relationship.
The district court where the suit was filed and the 1st Circuit Court of Appeals agreed with Oliveira, and the Supreme Court upheld the decision.
While a court’s authority under the Arbitration Act to compel arbitration may be considerable, it isn’t unconditional, said the Supreme 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,” the court wrote. “Accordingly, his agreement with New Prime falls within Section 1’s exception.”
It said the 1st Circuit was correct when it concluded that it lacked authority under the Arbitration Act to order arbitration in this case.
The American Trucking Associations said it was “disappointed by today’s decision, which will make it harder for motor carriers and independent owner-operators alike to rely on agreements to resolve their disputes through arbitration. Congress enacted the Federal Arbitration Act to promote arbitration as a fair, cheaper and more efficient alternative to litigation, and today’s decision deprives the trucking industry of the benefits of that congressional policy.”
The ATA added, “This will make dispute resolution in the trucking industry more costly than it is in other industries, which in turn will mean unnecessary costs passed on to the supply chain. It will also mean that many small-dollar disputes that commonly arise between owner-operators and motor carriers will go unresolved because while they could be cost effectively addressed in arbitration, are not significant enough to justify the expense of litigation.”
Steve Bojan, vice president of Hub International, an insurance brokerage with a specialization in the transportation industry, said the decision was “unanimous and very narrow.”
“Owner-operators have the right to have a court decide if their conflict concerning employment status belongs in court or before an arbitrator,” he said. “This is a huge decision as it will probably bring about a number of class action lawsuits against owner operator fleets. As we here at Hub have seen in a number of decisions, some trucking companies were not as disciplined in managing their owner-operator arrangements as they needed to be. While some lower courts may rule that these issues belong in arbitration as it states in the lease agreements, class action attorneys specializing in employment law will look at this as an area of opportunity.”
In a blog entry, attorneys at Holland and Knight–Michael T. Maroney, Linda Auerbach Allderdice and Jameson B. Rice said the case “has substantial impact on the arbitrability of independent contractor misclassification cases.”
They said it was “important to keep in mind what the Court did not determine in its opinion. First, the Court did not determine whether the Section1 exemption would apply to transportation workers who are not engaged in interstate commerce because the parties agreed that Oliveira was engaged in interstate commerce.”
“Second, the Court was able to keep a safe distance away from the ultimate issue of whether Oliveira was an ’employee’ for purposes of his minimum wage claims because Oliveira assumed for purposes of the appeal that an independent contractor relationship existed, and the key term under the FAA is ’employment’ not ’employee,'” they added.
“Finally, the Court declined to look beyond the FAA at other potential avenues to compel arbitration in this case. Drivers’ claims may still be subject to arbitration under state law, and, if so, the determination of whether a class action waiver in the arbitration agreement would be enforceable will likely be analyzed on a state-by-state basis,” they wrote.
Teamsters: Supreme Court decision ‘great victory’ for drivers
