The Supreme Court of the United States made a ruling Jan. 15 on a case involving New Prime Inc., setting a precedent that affects more than just the Springfield trucking company.
The Supreme Court’s 8-0 ruling prohibits New Prime, dba Prime Inc., from forcing arbitration in a lawsuit involving one of its truck drivers. Prime appealed to the SCOTUS after a decision by lower federal courts.
In the class-action suit filed in 2015, truck driver Dominic Oliveira alleges a Fair Labor Standards Act violation against Prime for failing to pay its apprentices the lawful minimum wage. The SCOTUS ruling means Oliveira’s suit can proceed.
In arguing for arbitration, Prime attorneys say Oliveira and other independent contractors should not be exempt from the Federal Arbitration Act. Oliveira had argued a provision in the nearly century-old law excludes the employment contracts of transportation workers. Prime sought to invoke its authority under the act to initiate arbitration, according to court documents.
Prime General Counsel Steve Crawford said via email while the company respects the Supreme Court’s decision, he called the outcome a “disappointing loss.” He said Prime plans to defend its practices in the class-action suit in the lower courts.
“Legally, Prime didn’t have any legs to stand on,” said Todd Spencer, president of the Owner-Operator Independent Drivers Association Inc. “Clearly the arbitration act did not apply to agreements of employees involved in commerce.”
The Grain Valley-based national trade association has 160,000 members, with 7,000 in Missouri. In July 2018, it filed an amicus brief to the Supreme Court in support of Oliveira.
Under his operating agreement with Prime, Oliveira is described as an independent contractor with a clause containing a mandatory arbitration provision. Prime attorneys have indicated the provision meant Oliveira could not use the Federal Arbitration Act clause as an argument.
Prime, according to court documents, sought to force arbitration, arguing “contracts of employment” referred to traditional employer-employee relationships and not independent contractors.
Spencer said the SCOTUS decision only applies to transportation workers. While acknowledging the decision sets precedent, he’s skeptical it will change much in the trucking industry involving contracts of employment.
“These are generally agreements between parties that have totally different amounts of leverage,” he said. “All of the bargaining leverage will still be in the power of the carrier. They can write agreements largely the way they want to. But if a dispute arises, it would have to go to court as opposed to shuffling it off to arbitration, which would greatly favor the carrier.”
Mark Walker, CEO of Transland Inc., said he’s monitored the case from afar. His opinions are mixed.
“I absolutely see both sides to the issue,” he said. “I think constraints that further tie the hands of employers make a difficult labor market even more challenging in the trucking industry.”
In delivering the Jan. 15 ruling, Supreme Court Justice Neil Gorsuch said, “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 ruling, according to Gorsuch, means courts will be able to determine whether the “contracts of employment” exclusion applies before arbitration begins.
“The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the act authorizes a court to stay litigation and send the parties to an arbitral forum,” Gorsuch wrote in his 20-page opinion.
Justice Brett Kavanaugh recused himself since the arguments were made in October, before he joined the court, according to the Supreme Court’s ruling.
“As is evident, the high court held onto principles first laid out nearly 100 years ago,” Crawford said in an emailed statement. “We obviously felt that the court’s ruling should have evolved with the law of business and culture. However, when they can hang on to something tied closer to our founding tenets, they tend to do so. We will return to the First Circuit optimistic and prepared to address these allegations on their merits.”
Crawford declined further comment.
Los Angeles-based Gibson Dunn & Crutcher LLP represents Prime in the case. Public Justice PC, Andrew Schmidt Law PLLC and Fair Work PC represent Oliveira, according to court records. Schmidt did not return a message seeking comment by press time.
Though he hasn’t considered what the court ruling might mean for his or other companies’ potential arbitration hearings with truck drivers, Walker said it’s a win for independent contractors. For them, arbitration is no longer an absolute.
“It seems to give a lot more power to independent contractors and their contract issues,” he said. “It’s going to cast a wide net for arbitration issues, for sure.”
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