A lawsuit brought against New Prime, Inc (“Prime”) has found its way all the way to the U.S. Supreme Court. The decision could have an enormous impact on forced arbitration agreements, driver classification, and driver pay.
In 2013, Dominic Oliveira was a driver for Prime. He had come through their CDL training program and went on to their paid training program at $0.14 cents per mile. When he completed training, he says he was pressured into their O-O program as an independent contractor. During this time, Oliveira alleges that Prime had total control of his schedule and home time, and even tracked his truck using a GPS.
When he found he couldn’t make money as an independent contractor, he quit and was rehired as company driver – a full employee. Since Oliveira claims that he duties as an independent contractor were almost identical to his duties as an employee, he sued Prime for back wages from his time as an independent contractor.
But this isn’t actually the issue being argued at the Supreme Court. Because when Oliveira sued Prime, the carrier tried to force him into arbitration – an out-of-court resolution of the case – using the employment contract he signed.
Companies often use forced arbitration agreements to prevent employees from filing costly lawsuits against them. And most often, they’re incredibly effective at doing so. But this time, the court found that the Federal Arbitration Act (FAA) doesn’t allow arbitration in the case of “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
In the past, “contracts of employment” has been interpreted to mean contracts for employees. But the lower court decision interpreted that phrase to mean any contract of employment – including those used for independent contractors.
If the Supreme Court sides with the lower court’s interpretation, that would mean that all interstate truckers would be exempt from forced arbitration agreements.
Unsurprisingly, megacarriers seem a bit panicked. The American Trucking Association (ATA) has filed a “friend of the court” brief asking the Supreme Court to rule in favor of Prime. According to their letter, doing otherwise would “would effectively nullify the advantages of arbitration in misclassification disputes.” Which could allow an untold number of drivers to sue carriers for back-wages, benefits, and other protections that employees enjoy which independent contractors do not.
Some pro-driver advocates however argue that since Prime had substantial control over Oliveira’s work schedule while he was an independent contractor, he was a de facto employee. This is the same argument that’s been used successfully in past against port trucking companies who allegedly misclassify their drivers to avoid paying living wages and benefits.
Some industry analysts are claiming that if O-Os and other independent contractor truckers are indeed found to be exempt from the FAA, the hiring market could become much more competitive and driver pay could spike significantly. But it could also greatly increase the already significant capacity crunch, raising the cost of goods for consumers.