Supreme Court Rules New Prime Cannot Compel Truck Drivers to Arbitration

High Court Clarifies "Contract for Employment" Exemption

In a landmark decision concerning the scope of the Federal Arbitration Act (FAA), the U.S. Supreme Court issued a unanimous decision in New Prime Inc. v. Oliveira, ruling in favor of a class of truck drivers challenging a carrier's attempt to compel them to individual arbitration of their wage claims.

The case arose after Dominic Oliveira, a long-haul truck driver classified as an independent contractor, filed a class action alleging that Missouri-based trucking company New Prime Inc. failed to pay wages. The company sought to enforce an arbitration clause in its contract with Oliveira under the FAA, arguing that Oliveira was not covered by the FAA's exemption for “contracts of employment" because he was an independent contractor.

Employment Contracts Include "Independent Contractors"

The Supreme Court rejected New Prime's argument and affirmed the lower court's decision allowing Oliveira to pursue his claims in federal court. The Court held that:

• Courts — not arbitrators — must decide whether the FAA’s Section 1 exemption applies; and
• The exemption for “contracts of employment” includes independent contractors, particularly transportation workers engaged in interstate commerce.

The Court analyzed the phrase “contracts of employment” according to its ordinary meaning at the time the FAA was enacted in 1925. It emphasized that courts should not assign modern meanings to older statutory language in a way that would effectively rewrite the law. Looking to contemporaneous dictionary definitions, the Court found no indication that the phrase was a technical term and concluded it was understood broadly to encompass any form of paid work.

As a result, the Court concluded that the drivers’ claims were not subject to mandatory arbitration and could proceed in court.

A Major Win for Truck Drivers

The Court's unanimous ruling is a major victory for truck drivers and other interstate transportation workers, ensuring that companies cannot avoid judicial review simply by labeling workers as independent contractors using contracts containing arbitration clauses. It preserves access to the courts for transportation workers asserting wage-and-hour claims and clarifies the scope of the FAA’s exemption.

The plaintiffs in Oliveira are represented by Hillary Schwab at Fair Work.