Prime v. Oliveira: A Rare Blow To Arbitration

On January 15, 2019, the US Supreme Court in Prime v. Oliveira issued a unanimous decision that the Federal Arbitration Act’s (FAA) exemption for “contracts of employment” now applies to independent contractors.  Prior case law simply applied this exemption to employees, but now the Supreme Court expanded the exemption to all transportation-type workers, including independent contractors. In other words, all transportation workers, whether an employee or independent contractor, are exempt from the FAA – the predominant statute employers use to compel arbitration.

As mentioned in previous blog entries, arbitration agreements eviscerate important legal rights a party has in court, and arbitration is no faster or cheaper than a matter you would see in a courtroom.  Instead, arbitration agreements load the deck for employers; thus, more and more employers include arbitration provisions in their employment/independent contractor agreements.  In fact, the use of arbitration agreements by private companies has exploded from 2 percent in 1992 to more than 55 percent in 2018.  While arbitration clauses are certainly on the rise, this ruling is a clear win for the plaintiff employee who seeks to vindicate her rights in court.

However, this is not to say transportation employees are completely immune to dastardly arbitration clauses.  Generally, the FAA, a federal act, preempts state arbitration laws. Now, transportation employees’ and independent contractors’ fight against arbitration will be waged using the applicable state law.  Fortunately, several state laws frown upon arbitration clauses (California bans arbitration clauses for wage claims, Montana prohibits arbitration clauses for workers’ compensation claims, and New Hampshire contains restrictions on employment arbitration), and a few states completely prohibit arbitration clauses in employment contracts (Iowa, Kentucky, South Carolina, and Rhode Island).  Indeed, the individual states are a potpourri of laws regarding arbitration and the results will undoubtedly be a mixed bag.

Nevertheless, this ruling is a win, albeit small, for employees, especially following a Supreme Court ruling which emboldened employers seeking arbitration.  The strongest obstacle to defeating arbitration clauses, the FAA, is no longer impeding the rights of transportation workers, whether they are employees or independent contractors.

If you have been harassed, discriminated against, wrongfully terminated, or otherwise wronged by your employer, and feel you might be hauled in arbitration, please contact us online or call us at (619) 342-8000.



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