Exemption of contract of employment of workers from Arbitration:
New Prime V. Oliveria 586 U.S. (2019)
Facts of the case
New Prime Inc. an interstate trucking company got into a contract with Dominic Oliveria, then Oliveira started to work for Prime as an independent contractor. After some time Oliveria complained that Prime control its substantial amount of work which is inconsistent with his status as an Independent contractor, due to which Oliveria terminated his contract with Prime as an independent contractor and started working as an employee to Prime.
Oliveria filed a suit against Prime on violation of the Fair Labor Standards Act (FLSA) by Prime a minimum wage statute of the state, with other claims. Prime filed a request under the Federal Arbitration Act (FAA) to compel arbitration, which Oliveira objected, claiming that the contract is exempt under Section 1 of the FAA and that, in any case, the question of the Section 1 exemption's application should be decided by the court.
Court held that Independent contractors are not covered by "contracts of employment of transportation workers,". After reaching this determination, the district court ordered further discovery on the question of whether Oliveira was an employee or an independent contractor in order to determine whether the arrangement was an employment contract under Section 1. Prime's attempt to invoke arbitration was thus dismissed by the district court.
The court of the First Circuit upheld the district court's decision to refuse the motion to compel arbitration, ruling that the FAA's applicability is a threshold question for the court to decide. The appeal court further stated that Section 1 does apply to agreements that purport to create an independent contractor relationship.
The Court ruled in a unanimous (8–0) decision that a court should decide whether the FAA applies, and that "contracts of employment" include those that purport to establish an independent contractor relationship. The Court reasoned that under the FAA and its structure, courts can only compel arbitration in arbitration agreements involving commerce or maritime operations. As a result, regardless of any delegation agreement, a court must determine whether the FAA applies to the contract in the present issue.
In determining the meaning of "contracts of employment," the Court looked to the phrase's origins and evolution, concluding that it was not a term of art that solely referred to contracts that constituted an employer-employee relation, but instead meant "work agreements" in its broadest sense. The Court determined that Oliveira's arrangement with New Prime falls inside Section 1's exception using this interpretation of "contracts of employment."
Prime contends that for the purposes of Section 1 of the FAA, determining whether a contract is a "contract of employment" or something else (such as an independent-contractor agreement) requires merely looking at the relationship described within the four corners of the contract. According to the FAA, no discovery or mini-trial into the nature of the parties' interactions is required or suitable.
Oliveira answers that Prime does not name a single source from before the FAA was enacted in 1925, pointing out that Prime depends on a dictionary produced in 2014, using the word "employee" rather than the phrase "contracts of employment" as used by Congress. According to Oliveira, the term "contracts of employment" had only one meaning when the FAA was created in 1925: agreements to perform work. According to Oliveira, the worker's employment status was unimportant.
The history, purpose, and statutory context of the transportation-worker exception, according to Oliveira, all support the conclusion that the FAA embraces this conventional meaning. According to Oliveira, Congress exempted all transportation workers' commitments to conduct work—not just those of common-law servants—to avoid upsetting previously approved dispute resolution rules governing transportation workers. It would have upset preexisting conflict settlement procedures if it hadn't, according to Oliveira.
The Independent Contractor Operator Agreements between New Prime and Oliveira, according to Prime, are not employment contracts. Oliveira allegedly engaged in the agreements as the owner of his own limited liability firm, Hallmark Trucking LLC, according to Prime. Because the Section 1 exemption does not apply to the contracts between Prime and Oliveira, Prime contends that the First Circuit should have ordered the parties' dispute to be resolved through arbitration under the FAA.
The Supreme Court's job, according to Oliveira, is to uphold the wording of statutes as written. If Prime feels rewriting the FAA would be a beneficial idea, Oliveira believes Prime should take its case to Congress rather than the Supreme Court.
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