On Jan. 15, 2019, the U.S. Supreme Court ruled that carriers should not be able to force owner-operators into arbitration.

A unanimous decision was made in favor of truck driver Dominic Oliveira, who sued carrier New Prime Inc.

In the original complaint, Oliveira claimed that owner-operators were essentially employees based on how they operated within New Prime. They were only allowed to cater to loads assigned by the carrier and were not guaranteed ownership of the commercial vehicle when terminated.

Oliveira alleged that owner-operators were under-compensated by New Prime, particularly during their onboarding and training periods.

What does arbitration mean?

An arbitration waives any party’s right to an appeal to the court of law.

New Prime claimed that drivers shouldn’t be allowed to sue the company. Instead, they could only submit their contentions to arbitration.

Oliveira responded that the court must first verify if the FAA applies to owner-operator independent contractors. He argued that, by virtue of Section 1 of the FAA, employees, including independent contractors, are exempt.

The First Circuit Court agreed with Oliveira, ruling that “workers” under Section 1 of the FAA also includes independent contractors. It was then affirmed by the Supreme Court, focusing on the term “contracts of employment” in the FAA.

“The Federal Arbitration Act requires courts to enforce private arbitration agreements,” wrote Justice Gorsuch in the court opinion. “But like most laws, this one bears its qualifications.”

Under Section 1, the FAA may not be used to force arbitration in disputes that involve contracts of employment.

“At that time, a ‘contract of employment’ usually meant nothing more than an agreement to perform work,” writes Gorsuch. “As a result, most people would have understood to exclude not only agreements between employers and employees, but also agreements that require independent contractors to perform work.”

What it means for owner-operators

Arbitration fully binds owner-operators to contract agreements provided by carriers. With the ability of carriers to force arbitration revoked, owner-operators may defend themselves against abusive wage practices.

Travis Baskin, Motive’s Head of Regulatory Affairs, said that this decision is encouraging news for owner-operators. He said:

“This is definitely good news. Arbitration can be a great way for two parties to agree on handling their legal disputes, but employment issues can feel especially one-sided. This ruling means that that worker can at least have their case heard by a Judge in a public forum.”

Teamsters.org also sees the Supreme Court’s ruling as a victory for workers in the transportation industry.

“Although we have consistently challenged employers’ attempts to compel private arbitration to avoid a public legal battle, the U.S. Supreme Court rule makes it clear that employers cannot and should not require drivers to waive their right to their day in court through binding arbitration agreements,” says Teamsters International Vice President Fred Potter.

However, it’s still too early to tell if it will put an end to the widespread wage theft.

“In these cases, there’s often a choice to make whether you want to fight in state court or in federal court. A lot of states have laws that allow an owner-operator’s contract to force arbitration, but the U.S. Supreme Court said that you won’t be forced into it by your contract if you go the federal court route. You’ll get your day in court,” says Travis Baskin.

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