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Video Law Alert: New Prime Oral Argument Preview

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

September 26, 2018

 

Video Alert: New Prime Oral Argument Preview

Next Wednesday, October 3, the United States Supreme Court is set to hear oral argument in New Prime Inc. v. Oliveiria, a case that will significantly impact the use of arbitration to resolve disputes with owner-operators. Several Scopelitis partners will attend the argument to provide real-time analysis. In the video linked below, partner Braden Core previews the arguments (running time ~4 minutes). If you cannot access the video, a summary appears below.

What is the case about?

The plaintiff, Dominic Oliveira, worked as an owner-operator for New Prime. He claims that, despite agreeing to do business with New Prime as an independent contractor (and through a business entity), he was in fact an employee, and that New Prime failed to pay him the minimum wage (among other things) pursuant to federal and state law. His independent contractor agreement contained a provision requiring the parties to submit any disputes to binding arbitration under the Federal Arbitration Act (FAA). New Prime moved to compel arbitration, and Oliveira opposed that motion. The lower courts held that Oliveira qualified under the FAA’s exemption for “transportation workers,” deeming his independent contractor agreement to be a “contract of employment.” This meant that he could not be compelled to arbitrate his claims.

What is the “transportation worker” exemption from the FAA?

When Congress passed the FAA many decades ago, it carved out certain work relationships from its scope. In a case called Circuit City Stores, Inc. v. Adams, the Supreme Court held that the exemption encompasses “transportation workers” (i.e., those “actually engaged in the movement of goods in interstate commerce”) operating under “contracts of employment.” Since then, lower courts have grappled with the “independent contractor v. employee” issue in attempting to determine whether an agreement qualifies as a “contract of employment.” The Ninth Circuit, for example, has engaged in a reclassification-based analysis, asking whether a given owner-operator was in fact treated like an employee before deciding whether the exemption applies. By contrast, the First Circuit has interpreted the FAA to mean that any “agreement to work” is exempt, such that all owner-operators are deemed to operate under “contracts of employment.” The First Circuit’s categorical approach is one of the two issues the Supreme Court has agreed to review.

What issues will the Supreme Court consider?

In addition to the First Circuit’s holding on the “transportation worker” exemption, the Supreme Court will consider whether the exemption is an “arbitrability” issue that must be resolved in arbitration pursuant to a valid “delegation” clause. Put differently, where the parties have agreed that the arbitrator should decide whether the exemption applies (or other threshold issues), is that agreement enforceable, or must the court decide the exemption issue in the first instance? New Prime argues that its arbitration agreement delegated such questions to the arbitrator. Oliveira counters that questions arising under the independent contractor agreement—including whether it qualifies as “contract of employment”—must be decided by a court.

What’s at stake?

The tenor and tone of the questions and answers given during the oral argument may allow for speculation about what the Supreme Court will ultimately decide. While the opinion will have a direct impact on transportation companies that have existing arbitration agreements with owner-operators, as well as those that may be considering implementing them, even if the FAA does not apply, a transportation business may still be able to compel arbitration by invoking the provisions of state arbitration law. However, those laws will vary by jurisdiction, and some jurisdictions have less favorable laws than under the FAA. As such, it is imperative that transportation businesses carefully consider choice-of-law issues in arbitration agreements with owner-operators.

What role does Judge Kavanaugh’s pending nomination play?

In light of recent developments, it is unclear whether Judge Brett Kavanaugh will be confirmed in time to participate in the oral argument. With only eight justices sitting on the Court currently, a four-four “tie” is a possibility, which would result in upholding the First Circuit’s holdings that “contracts of employment” encompass all agreements to do work, such as independent contractor agreements with owner-operators, and that a court should decide whether the exemption applies. That said, a “tie” would not establish precedent outside of the First Circuit (i.e., Massachusetts, Maine, and New Hampshire).

What’s Next?

As noted, the Court will hear oral argument on October 3. Shortly after the argument, Scopelitis will publish a reaction video from the courthouse steps. An opinion is not expected until 2019. Watch our Twitter, Facebook, and LinkedIn accounts for updates. Our prior Transportation Law Alerts on the New Prime case are available here and here. 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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