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New Prime Inc. v. Oliveira

Supreme Court of the United States
2019 U.S. LEXIS 724, 139 S. Ct. 532, 202 L. Ed. 2d 536 (2019)
ELI5:

Rule of Law:

A court, not an arbitrator, must determine if a contract is excluded from the Federal Arbitration Act's coverage under § 1. The § 1 exclusion for "contracts of employment" of transportation workers encompasses agreements with independent contractors, based on the term's meaning when the Act was passed in 1925.


Facts:

  • New Prime is an interstate trucking company.
  • Dominic Oliveira entered into a contract to work as a driver for New Prime.
  • The contract designated Oliveira as an independent contractor, not an employee.
  • The agreement contained a mandatory arbitration clause for any disputes arising from their relationship.
  • This arbitration clause included a 'delegation clause,' granting the arbitrator the power to decide questions about the scope of the arbitrator's own authority.
  • A dispute arose when Oliveira alleged that New Prime denied its drivers lawful wages by misclassifying them as independent contractors to avoid paying minimum wage.

Procedural Posture:

  • Dominic Oliveira filed a class action lawsuit against New Prime Inc. in the U.S. District Court for the District of Massachusetts (a federal trial court).
  • New Prime filed a motion to compel arbitration based on the parties' contract.
  • The District Court denied New Prime's motion, ruling that the court must first determine if the contract was excluded from the Federal Arbitration Act's coverage under § 1.
  • The District Court then found that the § 1 exclusion did apply and it therefore lacked authority to compel arbitration.
  • New Prime, as appellant, appealed the decision to the U.S. Court of Appeals for the First Circuit.
  • The First Circuit affirmed the trial court's judgment, holding that the § 1 exclusion is a question for the court and that it applies to independent contractors.
  • The U.S. Supreme Court granted a writ of certiorari to resolve a circuit split on the issue.

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Issue:

Does the term 'contracts of employment' in § 1 of the Federal Arbitration Act, which exempts certain transportation workers from the Act's coverage, encompass independent contractor agreements, and must a court determine the applicability of this exclusion before compelling arbitration?


Opinions:

Majority - Justice Gorsuch

Yes, the term 'contracts of employment' in § 1 encompasses independent contractor agreements, and a court must decide this threshold question. The Federal Arbitration Act (FAA) does not grant courts unconditional authority to compel arbitration. A court must first determine whether the contract at issue falls within the scope of the FAA as defined by §§ 1 and 2. The § 1 exclusion for 'contracts of employment' is a threshold question of arbitrability for the court, not the arbitrator, to decide, even in the presence of a delegation clause. To determine the meaning of 'contracts of employment,' the Court must look to the ordinary meaning of the words at the time of the FAA's enactment in 1925. Historical evidence, including dictionaries, case law, and statutes from that era, indicates that 'employment' was a broad term synonymous with 'work,' and was not limited to the master-servant or employer-employee relationship. The statute's use of the general term 'workers,' rather than the more specific 'employees,' further supports the conclusion that Congress intended a broad interpretation that includes independent contractors.


Concurring - Justice Ginsburg

Yes. Justice Ginsburg joins the majority's opinion in full but writes separately to emphasize that while statutory interpretation should begin with the ordinary meaning of words at the time of enactment, this is not a universally rigid rule. She notes that Congress sometimes enacts statutes with terms intended to have 'dynamic potential' and be interpreted flexibly to adapt to changing times and circumstances, such as the Sherman Antitrust Act. However, in this case, the majority's historical approach to interpreting the Federal Arbitration Act is the correct one.



Analysis:

This decision significantly impacts the scope of the Federal Arbitration Act, particularly within the transportation sector and the gig economy. By ruling that courts must first decide the applicability of the § 1 exemption, the decision limits the power of 'delegation clauses' that parties use to send all disputes, including arbitrability, to an arbitrator. More importantly, the Court's originalist interpretation broadens the § 1 exemption to include independent contractors, potentially removing a large class of workers from the FAA's mandate and allowing them to pursue claims, such as wage disputes, in court rather than in private arbitration.

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