SCT Holds Independent Contractors "Workers" Under Federal Arbitration Act

The Supreme Court unanimously today held that independent contractors are "workers" within the meaning of the Federal Arbitration Act and thus typically not covered by that Act when agreeing to arbitrate, but rather covered by state law.

Oliveira was a truck driver for Prime under a contract calling him an independent contractor and containing an arbitration clause. Oliveira filed a class action alleging underpayment of wages. Prime moved to compel arbitration under the FAA. But Oliveira persuaded the Supreme Court that as an independent contractor he was covered by the FAA Section 1 exclusion of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce."

Employment arbitration expert Professor Rick Bales explains further.

Supreme Court Hearing Three Arbitration Cases in October

On October 3rd the Court heard oral arguments in New Prime, Inc. v. Oliveira, asking whether  FAA section 1, which excludes certain transportation “workers” from the FAA’s reach, applies to independent contractors, in addition to the employees, of a transportation company.  Ogletree Deakins writes: “Given the justices’ seeming alignment with Oliveira at the oral argument, it is anticipated that the Supreme Court will ultimately issue a decision allowing truck drivers and others independent contractors in the transportation industry to avoid arbitration.”

In late October the Court will hear Lamps Plus, Inc. v. Varela in which the Ninth Circuit held the agreement permitted class arbitration.

The Court will also hear Henry Schein v. Archer & White Sales, Inc. This contract provided for arbitration of all disputes, except claims for injunctive relief and involving intellectual property rights. Plaintiff sought injunctive relief and argued the case should be litigated, but defendants argued the arbitration agreement sends to the arbitrator any questions about the arbitrability of some or all of the case. The Fifth Circuit ruled that the court should decide arbitrability, and affirmed denial of the motion to compel arbitration.

The National Law Review provides a more detailed discussion of the issues.