Truckers, Arbitration, and Independent Contractors: SCOTUS Hears Oral Arguments in New Prime Inc. v. Oliveira

The legal battles continue over arbitration and over how to define “employee” versus “independent contractor” — this time at the federal level and with respect to commercial truck drivers. In early October 2018, the Supreme Court of the United States (“SCOTUS”) heard oral arguments in New Prime, Inc. v. Oliveira, No. 17-340 (2018). Based on the questions and attitudes exhibited by the various Justices, the court may strike down arbitration clauses for commercial truck drivers who are independent contractors. See new report here.

This is of importance to San Diego businesses since trucking and shipping costs might see a significant increase. Mandatory arbitration contracts are common for independent commercial truck drivers. Among other results, those arbitration contracts have kept truck driver pay at a lower rate than the market might otherwise bear. There is a significant truck driver shortage right now.

Thus, if the arbitration contracts are struck down, many truck drivers will likely see a pay raise, which will be reflected in higher shipping and trucking costs.

San Diego Corporate Law: Facts of Case, Legal Issues, Federal Arbitration Act, and “Employee”

The case was brought by Dominic Oliveira, a commercial truck driver. He started his training as a truck driver for New Prime, Inc. New Prime runs a training school for new truck drivers and, generally, waives the tuition if the truck drivers sign on with New Prime for at least a year. The new trainees are termed “independent contractors” and the agreements contain arbitration provisions. Oliveira finished his trainee program and began working for New Prime. At various times, he worked as an independent contractor, but also as a company-employed driver. Oliveira was unhappy with his pay rate and eventually sued New Prime in federal court in Massachusetts alleging, among other things, failure to pay minimum wages and other violations of the US Fair Labor Standards Act and Missouri labor laws. Oliveira was also seeking to create a class action case where he would be the representative of thousands of other commercial truck drivers who were — according to his lawsuit — similarly denied minimum wages and other benefits.

The specific question for the Supreme Court was whether the mandatory arbitration provision was enforceable under the US Federal Arbitration Act (“FAA”). When Congress passed the FAA back in the 1920s, Congress specifically provided that arbitration could not be required for “contracts of employment” for transportation “workers.” New Prime has been arguing — to the lower court and now to the Supreme Court — that its independent contractor agreements are not “contracts of employment” and that truck drivers like Oliveira are not “employees.” However, the lower court did not agree and ruled in favor of Oliveira. The Justices also seemed skeptical of New Prime’s arguments. The case may turn on the fact that Congress used the word “worker” in the FAA rather than “employee.” “Worker” has a broader definition and will likely be deemed to encompass truck drivers who drive under independent contractor agreements.

The bottom line is that arbitration for commercial truck drivers may be struck down which will likely result in higher shipping and trucking costs for San Diego businesses.

Contact San Diego Corporate Law

If you would like more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard tracks and reports on new legal developments impacting San Diego businesses. Mr. Leonard provides a full array of legal services for businesses including contract review and drafting, mergers and acquisitions, corporate formations, private placement memorandums, and employment-related services like crafting employee handbooks. Mr. Leonard can be reached at (858) 483-9200 or via email.

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