The U.S. Supreme Court ruled Jan. 15 owner-operators cannot be forced into mandatory arbitration, a decision observers suggested could have ripple effects across the country.
The 8-0 New Prime v. Oliveira decision “will have a significant impact on the trucking industry which frequently uses independent contractors to accomplish its objectives and arbitration to efficiently resolve individual disputes,” said John B. Lewis, a partner with BakerHostetler.
The ruling is likely to spark “a number of class-action lawsuits against owner-operator fleets,” said Steve Bojan, vice president at Hub International.
A statement from the firm Scopelitis, Garvin, Light, Hanson & Feary said while the ruling “would seem to foreclose efforts to enforce arbitration agreements with owner-operators under the FAA, it does not necessarily limit motor carriers’ ability to have those agreements enforced under state arbitration law. However, those laws will vary by jurisdiction, and some states have less favorable — or less well-developed — precedent on key issues, such as class-arbitration waivers.”
From a technical standpoint, the decision hinged on the phrase “contracts of employment” from the 1925 Federal Arbitration Act.
The case, heard prior to Justice Brett Kavanaugh joining the court, involves owner-operator Dominic Oliveira and refrigerated truckload carrier Prime Inc., based in Springfield, MO.
In 2015, Oliveira headed a class-action lawsuit claiming he and other drivers were misclassified as contractors by Prime.
The company claimed that Oliveira’s contract required disputes be resolved through individual arbitration under the FAA. But the Supreme Court agreed with previous ruling the term "workers" includes the modern independent contractor model.
Fred Potter, a vice president with the Teamsters union and director of its port decision, called the decision “a great victory for all workers in the transportation industry, including employees, legitimate independent contractors, and drivers misclassified as independent contractors who are suffering egregious wage theft.”
He noted Supreme Court made “clear that employers cannot and should not require drivers to waive their right to their day in court through binding arbitration agreements.”
Conversely, American Trucking Associations expressed disappointment in the decision, saying it “will make it harder for motor carriers and independent owner-operators alike to rely on agreements to resolve their disputes through arbitration.”
Scopelitis noted that during the oral argument, justices inquired whether an owner-operator who did not personally perform services or who operated multiple trucks would be subject to the exemption. However, this was not addressed in the decision, potentially opening the door for future litigation.
