On Feb. 26, 2018 the U.S. Supreme Court granted certiorari in New Prime v. Oliveira, 17-340. It took up two questions for review: (1) whether a dispute over applicability of the Federal Arbitration Act (FAA)’s Section 1 exemption must be resolved in arbitration pursuant to a valid delegation clause; and (2) whether the FAA’s Section 1 exemption, which applies only to “contracts of employment” involving transportation workers, is inapplicable to agreements establishing an independent contractor relationship. A related issue is whether the question of independent contractor status is decided solely on the words of the contract or is a factual issue requiring discovery.

Background

New Prime (Prime) is an interstate trucking company that operates a student truck driver apprenticeship program. After Dominic Oliveira completed his apprenticeship as a trainee, Prime offered him the choice of working as a company driver or as an independent contractor. He signed a contract agreeing that he would be “deemed for all purposes to be an independent contractor and not an employee of Prime.” In addition the agreement provided that “disputes arising under, arising out or relating to the relationship created by the agreement” would be subject to arbitration, “including the arbitrability of disputes between the parties.” The agreement also contained a class action waiver provision. After working under the agreement as an independent contractor, Oliveira briefly stopped driving for Prime, and then returned as a company driver. Prime made deductions from its payments to Oliveira for lease payments owed on the truck, and required Oliveira to supply tools and fuel. During several pay periods, Oliveira owed money to Prime, despite having worked during the pay period. Oliveira then brought a class action lawsuit against Prime, alleging Fair Labor Standards Act violations and state law claims. Prime moved to compel arbitration under 9 U.S.C. §16. The U.S. District Court for the District of Massachusetts denied the motion. On appeal, the First Circuit affirmed. Oliveira v. New Prime, 857 F.3d 7 (1st Cir. 2017). The appellate court reasoned that whether the FAA Section 1 exemption applied was a question of law to be resolved by the court, even in the face of a valid clause delegating the issue of arbitrability to the arbitrator. Two members of the panel would have gone further, stating that “contracts of employment” for purposes of Section 1 include “transportation-worker agreements that establish or purport to establish independent-contractor relationships.”

FAA Section 1