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Law Alert: U.S. Supreme Court Hears Oral Argument in New Prime

by Braden K. Core, Gregory M. Feary, Prasad Sharma, Brandon K. Wiseman, Ryan W. Wright

October 3, 2018

 

Law Alert: U.S. Supreme Court Hears Oral Argument in New Prime

Today, an eight-justice U.S. Supreme Court heard oral argument in New Prime, Inc v. Oliveira, a case primarily about whether trucking independent contractors are exempt from the Federal Arbitration Act (FAA) (for more background, see our earlier Scopelitis Video Alert). Scopelitis partners Braden Core, Andy Butcher, and Prasad Sharma were in attendance. Their video update from the courthouse steps is linked below.

The argument primarily focused on two questions: (1) whether the words “contract of employment” in the FAA exemption applies to all transportation workers – whether independent contractors or employees; and (2) if not, how in-depth should a court or arbitrator’s initial analysis be to determine whether the exemption applies.

Chief Justice Roberts and Justice Gorsuch, who have in the past voted in the majority in pro-arbitration cases, noted that the term “employment” has traditionally had a broader scope than just an employer-employee relationship. They appeared open to Oliveira’s argument that the definition of “employment” in contemporary texts at the time of enactment of the FAA included independent contractors. If true, independent contractors would be exempt from the FAA.

Those justices who have been more hostile to arbitration (Justices Ginsburg and Kagan) focused on the “independent contractor versus employee” analysis and made clear their view that the parties’ label in the contract between them cannot alone be dispositive of whether the FAA applies. While skeptical that Oliveira was an independent contractor (Justice Ginsburg characterized his claim as New Prime having “rigged” his classification), their questioning suggested a court should look beyond the contract to other facts to determine whether the individual is an employee, and thus exempt.

Perhaps the biggest unresolved issue came as a result of questioning by Justices Kagan and Alito. Oliveira’s counsel conceded that a contract between two businesses for transportation would be subject to the FAA but, when pressed, suggested that if the contract was for personal services of a member of an LLC, then that would be exempt. Since the firm-recommended independent contractor agreements allow for hiring others to perform driving services, it is unclear how Oliveira’s counsel’s proposed framework would apply.

It is often difficult to predict the outcome of a case based on oral argument. If the court cannot assemble a majority for an opinion, they have the option of rehearing the case when a ninth justice is confirmed. If you have questions, please reach out to Greg Feary, Braden Core, Brandon Wiseman, Prasad Sharma, or Ryan Wright.

 

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Scopelitis Transportation Law Alerts are intended as a report to our clients and friends on legal developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

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