(header image by Joe Ravi, license CC-BY-SA 3.0)
Last week, the Supreme Court ruled in favor of owner operator contract truckers in the case New Prime vs. Oliveira. Though it was a company that hauled generalized freight, this could have ramifications in car hauling.
This matter is nuanced, so bear with me on the details – they are important. While it does sort of have to do with the misclassification of employees as independent contractors, no real decisions were made about misclassification. It was all about a little something called “arbitration.”
The Background: Oliveira was an independent contractor working for the Missouri freight company, New Prime. Over the course of his contract, he believed that New Prime was unfairly taking advantage of his independent operator status by using him as an employee, but deducting too many costs from his paycheck. He eventually quit.
The Original lawsuit: Then, in classic American fashion, Oliveira decided to sue New Prime for misclassification of employment. New Prime, also in classic American fashion, tried to force the suit out of the courts through the required Arbitration clause of Oliveira’s contract.
“Arbitration” is a type of legal mediation written into some contracts (usually consumer, like when you buy a car) that states if you have any trouble with your product, you can not sue the company, you must open a dispute through a mediator. This is a fast alternative to a legal court, which allows a mediator to settle a dispute, instead of a judge. The only problem is, arbitration is final; no appealing to a higher court if you don’t like the outcome.
A second problem is that in many arbitration contracts, the signatory does not get to choose the mediator. It’s kind of like entering a competition where all the judges are picked by your top competitor. How would you ever win?
So what – you might say. Oliveira signed the contract with the arbitration clause, so who cares? It’s his fault for signing away his right to a lawsuit.
Yes, but this wasn’t technically (legally) voluntary. There are two kinds of arbitration: voluntary and forced.
Voluntary arbitration can be beneficial, like in an amicable divorce (if there were such a thing.) Whereas forced arbitration, like the clause of Oliveira’s contract, can potentially be problematic if one party (New Prime) created the forced arbitration contract.
The United States happens to be an arbitration-friendly country, and the US also happens to have a law called the Federal Arbitration Act (FAA), which makes it easier for companies (especially employers) to ensure that courts enforce the forced arbitration sections of their contracts.
BUT the FAA has one caveat. It stipulates that employers MUST EXCLUDE “contracts of employment of…workers engaged in…interstate commerce.”
New Prime argued that because Oliveira was an independent contractor and not an employee, he was not “in contract of employment” and thus did not qualify for the exemption.
Are you with me so far?
So this Supreme Court decision was about whether or not Oliveira had to go through arbitration – or if he was allowed to sue New Prime.
“So this Supreme Court decision was about whether or not Oliveira had to go through arbitration – or if he was allowed to sue New Prime.”
And the Supreme Court decided unanimously that Oliveira’s arbitration clause was not binding, because he obviously was in a contract of employment that included interstate commerce, according to the Federal Arbitration Act.
Oliveira’s next move will likely be to begin his lawsuit against New Prime for underpaying and misclassifying him as an owner operator. If his claims are to be believed, it’s possible he could win. Of course, it will be months or years before that decision is ever made.
What does this mean for trucking – especially car hauling?
Arbitration clauses exist in car hauling as well. Some of the largest employers of owner operators in car hauling have arbitration in their contracts. This can affect any lawsuit that drivers may have against their employers in the future.
Also generally, this is seen as a win for contract workers. Oliveira is a very narrow ruling, so it’s unlikely that it will set a precedent (because it’s unlikely that anything else will be brought to the court involving both arbitration and independent contractors) but it’s a win nonetheless.
Are there lawsuits in car hauling that this ruling is going to affect right now?
None that we know of. If you know of any ongoing lawsuits that this might affect, let us know in the comments! Or tell us what you think of the ruling, or if you have an arbitration clause as an owner operator.