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  • Randy

Supreme Court Rules on Independent Contractors

The US Supreme Court recently ruled unanimously on New Prime, Inc V. Oliveira in favor of the Independent contractor's right to be exempt from the Federal Arbitration Act (FAA) of 1925. Companies routinely stipulate mandatory arbitration in their employee contracts for employment disputes because it is much faster for everyone and much cheaper for the employer.

The Issue here is that the FAA does not apply to employees of trucking companies, which New Prime is. However, Oliveira (truck driver) was an Independent Contract of New Prime, not an employee. So when Oliveira tried to file a class action suite against New Prime for failure to pay, New Prime attempted to force Arbitration using the Federal Arbitration Act based on his Independent Contractor status, and Oliveira appealed. The case moved its way the supreme court where they found unanimously in favor of Oliveira.

The prevailing argument is that when the FAA was enacted in 1925, the term employment referred more broadly to any pay for any work. Unlike today where the employer/employee relationship is different than the company/contractor relationship. And therefore the FAA should be interpreted to include both contractors and employees and Oliveira cannot be compelled into arbitration, instead he can pursue litigation through the regular courts. This was a "spirit of the law" victory over the "letter of the law".

While this specifically applies to the trucking industry, it is nonetheless interesting how the term employee and the meaning of employment has changed over the century. This is also now a precedent where contractors and employees are considered the same, and I wonder if this will have an impact on any other cases.

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